CLT Council Committees Meet Next Monday - On June 5th, Charlotte City Council Committees will meet as they always do on the first Monday of each month. Next week's meetings will be of particular interest as the next wave of UDO text amendments will likely be discussed in the Transportation, Planning, & Development Committee. A final resolution on the Eastland Project may also be in the offing in the Economic Development Committee.
Originally published on May 25, 2023, by Jim Fraser for NAIOP.
A recent report from the American Institute of Architects shows that nonresidential construction spending is expected to slow to a growth rate of 5.8% in 2023 (down from 10% in 2022) and then fall to a mere 1% growth rate in 2024. Recent years brought new stresses on the industry – COVID-19 shutdowns, supply chain woes, labor shortages and bank failures have slowed projects or put them entirely on hold.
Associated Builders and Contractors predicts that the construction industry will need to attract more than 500,000 extra workers in 2023 – on top of the normal pace of hiring – to meet labor demand. Real estate valuations are softening and have negatively adjusted in many markets as well. In Los Angeles, for instance, office building valuations declined by 40% in the first two months of the year, according to data from Yardi Matrix.
At the same time, the cost of capital has risen considerably. Starting in March 2022, the Federal Reserve began hiking interest rates to quell inflation, which hit the highest level seen in four decades in late 2022. While the Fed’s efforts appear to have slowed inflation, a number of macroeconomic factors suggest a rough patch still lies ahead for the economy. This includes volatility in the bond markets and turbulence in the banking sector. Silicon Valley Bank’s failure in March was the largest since the Great Recession. Signature Bank shuttered days later, and Credit Suisse was swallowed up by a rival in the wake of its struggles. In turn, economists are seeing a pullback in bank lending — a trend that will affect commercial construction in the months ahead.
We're back with our popular "Two for Tuesday PLUS" edition providing education for you about relevant issues. Here's our list of things YOU should know about:
PLEASE NOTE: The City’ s submittal portal Accela Citizen Access (ACA) will be “under construction” on Thursday, June 1st thru Sunday, June 4th. ACA will re-open on Monday, June 5th. CLT Development Center
Rob Nanfelt, Executive Director of REBIC, take: Anything that can be done to smooth out the process and provide more certainty is a positive. We appreciate staff taking the initiative on this. The additional reviews that will come with the new stormwater and tree requirements will be where some delays are inevitable - probably as much as 5 to 7 business days. It will take some time to get this right.Originally published on May 30, 2023, by Jennifer Lefurgy, Ph.D. for NAIOP.
The NAIOP Research Foundation, as part of its Industry Trends meeting, recently hosted a panel discussion on what’s next for the office sector. Analysts from leading service firms joined NAIOP Research Foundation Governors and office developers Greg Fuller, president and COO, Granite Properties and Paul Ciminelli, president and CEO, Ciminelli Development, to discuss problems and potential opportunities. The panelists agreed that the sector will undergo a shakeout that will include transformation, streamlining, new approaches to work and holistic solutions.
Remote work and economic headwinds have created a negative demand shock in the office sector and a temporarily “broken” market that has not yet reached stability. Before the pandemic, office workspaces were densifying, with less square footage assigned per employee. Remote work and downsizing accelerated this trend, with tenants now needing less space per employee. Although office-using employment has rebounded from the brief pandemic-induced recession, office space demand has declined sharply. Phil Mobley, national director of office analytics at CoStar, estimated that the gap between office-using employment and previously expected demand could be as much as 400 million square feet. As supply continues to come online, vacancy rates will continue to climb over the next three years with negative absorption levels higher than during the Great Financial Recession.
Originally published on May 25, 2023, by Marc Selvitelli, CAE for NAIOP.
Today the Supreme Court issued a unanimous decision in Sackett v. EPA, a case involving the jurisdiction of the Clean Water Act and the definition of “Waters of the United States” (WOTUS), and an issue on which NAIOP has been active on behalf of commercial real estate. In a victory for NAIOP members and the CRE industry, the Court ruled that the Clean Water Act extends only to wetlands that are “as a practical matter indistinguishable from waters of the United States” and that have a continuous surface connection with that water.
For many years, NAIOP has advocated for commonsense regulation to protect our nation’s wetlands that is clear, increases predictability and consistency in EPA and Army Corps of Engineers wetlands decision-making, and reduces unnecessary permitting delays. Our most recent comments on the Biden administration’s WOTUS rule reflected this approach. Today’s Supreme Court decision finally clarifies the legal test needed to determine whether a federal wetlands permit is required for a development project. This will go a long way to reducing the uncertainty and added costs of delay that were the result of the legal ambiguity that existed.
The Biden WOTUS rule had been suspended in 26 states as a result of legal challenges. Today’s Supreme Court ruling will most likely force changes to the Biden administration’s regulation to ensure its application is consistent with the decision. NAIOP members should rest assured that we will continue to work with federal policymakers as regulations governing our industry are developed.
As always, please feel free to ask any questions about this or any of our advocacy positions.
Originally published on May 23, 2023, by Shawn Moura Ph.D., for NAIOP.
NAIOP National Forums members attending last week’s annual Symposium had the opportunity to tour several projects in the office and life science markets in East Cambridge, Somerville and the greater Boston market. The tour, led by Rob Dickey, Executive Vice President at Leggat McCall Properties (LMP), included site visits to two mixed-use projects that are currently under development.
East Cambridge is a central hub for life science and technology firms in the Boston area, with 8.0 million square feet of office space and 8.6 million square feet of lab space, and an additional 3.6 million square feet of office and lab space currently under development. The market enjoys low direct vacancy rates (2.9% for office, 1.8% for lab) and high rents ($102 gross per square foot asking rent for office space, $116 triple net lease asking rent for lab space, according to JLL). Prominent organizations in the area include MIT, Sanofi, Moderna, Novartis, Eli Lilly, Google, Apple, IBM, Microsoft and Biogen.
Originally published on May 19, 2023, by Kathryn Hamilton, CAE for NAIOP.
Opening with an image of a sailboat, National Forums Symposium keynote Heidi Learner said the photo captures the whipsaw tone of economic news today, with sudden shifts in unexpected directions.
Learner is head of innovation with Altus Labs and spoke to 800+ NAIOP National Forums members during their annual meeting this week in Boston. Here are some key takeaways from her remarks:
Originally published on May 19, 2023, by Kathryn Hamilton, CAE for NAIOP.
The Boston seaport has been continually reshaped since the 1800s, devolving from what was once a thriving area of commerce to acres of muddy parking lots and a few restaurants. Today, it is being reimagined again in a rapid and remarkable transformation that includes soaring office and lab towers, high-end residential, and all the retail services you could imagine.
Members of NAIOP’s National Forums toured two components of the seaport during their annual Symposium this week in Boston, hearing from the developers, investors and advisors shaping the site today.
Boston Global Investors is a leading partner and developer of Seaport Square, a 6.3 million square foot urban revitalization and the city’s largest master-planned community to date. Kevin Benedix, chief operating officer and chief financial officer, walked Forums members through the history of the project, its inspiration, and how it’s continued to evolve.
Originally published on May 19, 2023, by Kathryn Hamilton for NAIOP.
Opening with an image of a sailboat, National Forums Symposium keynote Heidi Learner said the photo captures the whipsaw tone of economic news today, with sudden shifts in unexpected directions.
Learner is head of innovation with Altus Labs and spoke to 800+ NAIOP National Forums members this week during their annual meeting in Boston. Here are some key takeaways from her remarks:
Originally published on May 11, 2023, by Brielle Scott for NAIOP.
California’s Title 24, the state’s energy code, has required solar for all low-rise multifamily projects since 2016, but new provisions have gone into effect this year, impacting any projects permitted since Jan. 1, 2023.
To help navigate the regulatory landscape and explain how solar and energy storage can benefit building owners and developers, Rachel McCafferty, director of business development for CalSolar Inc., shared her expertise during a NAIOP webinar on the topic.
“The solar requirement has been extended to not just multifamily projects but to all commercial and industrial new construction in California,” McCafferty explained.
Originally published on May 19, 2023, by Kathryn Hamilton for NAIOP.
The Boston seaport has been continually reshaped since the 1800s, devolving from what was once a thriving area of commerce to acres of muddy parking lots and a few restaurants. Today, it is being reimagined again in a rapid and remarkable transformation that includes soaring office and lab towers, high-end residential, and all the retail services you could imagine.
Members of NAIOP’s National Forums toured two components of the seaport during their annual Symposium this week in Boston, hearing from the developers, investors and advisors shaping the site today.
Boston Global Investors is a leading partner and developer of Seaport Square, a 6.3 million square foot urban revitalization and the city’s largest master-planned community to date. Kevin Benedix, chief operating officer and chief financial officer, walked Forums members through the history of the project, its inspiration, and how it’s continued to evolve.
Originally published by Adam Roth for the Spring 2023 Issue of NAIOP Development Magazine.
A recent Q&A in the Wall Street Journal with Marie-Christine Lombard, CEO of international freight-forwarding firm Geodis SA, includes a comment that sums up the current state of the global logistics industry: “The entire supply chain is being rethought and recalibrated and re-costed.”
Lombard is correct. Risk is being assessed differently and the supply chain is changing, which means industrial real estate will follow.
For example, when transportation costs 10 times more than rent, transportation will dictate site selection. It is far and away the biggest determining factor that goes into where companies locate industrial real estate. Specifically, there is a concept called the “Rule of 1.5,” which is defined as whatever affects transportation will impact industrial real estate a year and a half later.
Originally published by Matthew Goelzer and Maribel Barba for the Spring 2023 Issue of NAIOP Development Magazine.
Imagine playing soccer or shooting hoops on the outskirts of Mexico City while atop a 524,549-square-foot Costco Wholesale project. Built on a landfill, this unique retail warehouse, parking structure and loading bay is almost completely hidden from public view.
In addition to the soccer field and basketball courts, the Costco also houses a children’s roller park and a green roof, which are designed to meld into the neighboring landscapes and serve the community. A pedestrian bridge and walking/running path connect the sports facilities to the adjacent Parque La Mexicana, integrating the new installation with the urban park’s sprawling recreational offerings.
It’s not news that large parcels of developable land can be difficult to come by in dense urban areas. Finding a location in burgeoning Santa Fe, once a sand quarry, then a construction landfill, and now an economic hub dotted with high-rises outside Mexico City, was no small challenge.
Originally published by Chris Lee for the Spring 2023 of NAIOP Development Magazine.
The commercial real estate industry is facing many challenges as it moves into 2023. Amid rising interest rates, the lingering impacts of COVID, high levels of inflation, a recessionary economy, shifting capital markets, technological advancements, the Great Resignation, quiet quitting and demographic transitions, one element remains clear and constant — talent management. The real estate industry can’t operate and deliver successful outcomes without exceptional talent and leadership. However, those two factors also come with rapidly rising compensation and retention challenges.
Several recent CEL & Associates post-COVID surveys found that rewarding and retaining talent has become the No. 3 or No. 4 priority for real estate CEOs and boards of directors. Exceptional talent and HIPOs (high-potential employees) are difficult to find and even more challenging to retain without a robust talent-management strategy, and competitive compensation and long-term incentive plans. Talent comprises 65% to 70% or more of most real estate firms’ operating budgets, yet only 27% of real estate organizations have a competitive, well-thought-out talent-management plan. Only 32% of real estate firms have a formal succession plan for CEO and other C-suite positions. Slightly more than 76% of real estate firms have “concerns” relative to retaining top talent.
While interviewing Tracy Montross, we discovered some amazing facts about her, and the impact this pivotal airport and airline has on the health of our entire region. For instance, did you know that at one point during the pandemic, our own Charlotte Douglas International Airport (CLT) was the busiest terminal in the world? It’s a testament to the airline that has helped put us on the world map in terms of attracting, maintaining, and growing business opportunities around the greater Piedmont region.
Charlotte, (or CLT which represents 5% of the entire GDP for the state of North Carolina) is fortunate to serve as America’s second-largest hub, connecting us to the world with an average of 560 daily flights, more than 170 destinations, and 23 countries, serving more than 42 million travelers in 2022. Its regional impact on our economy, huge employment figures, and the way it supports our ability to attract world businesses; this is truly a subject REBIC wants you to know about!
Members from NAIOP’s three chapters are in Raleigh today to advance the priorities of the commercial real estate development industry in meetings with state lawmakers. The 2023 Legislative Priorities focus on economic development initiatives, tax measures, and regulatory reforms that meet the current and future growth within the state.
A top priority for NAIOP of North Carolina this year is local permit reform legislation that reduces inefficiencies and brings more accountability, consistency, and transparency to the process. The passage of HB 332/SB 275I will achieve this by establishing a 21-day period for a local entity to review an application. If the local permitting entity is unable to meet this timeframe, the applicant may seek approval from a third-party (engineer) or the Department of Insurance. Other elements of the bill include:
NAIOP members are distributing a Permit Reform Flyer during meetings to ensure lawmakers are informed and educated on the significance of this legislation for the industry. The flyer reflects the importance of passing HB 332/SB275 now!
NAIOP’s Day at the State Capitol underscores the importance of NAIOP and its members remaining engaged at every level of government to ensure the interests of commercial real estate are considered during the policymaking process.Mortgage borrowers with good credit may face higher costs under a new plan from federal mortgage associations Fannie Mae and Freddie Mac. The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023. Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.
Originally published on April 28, 2023, by Marie Ruff for NAIOP.
There is no one path to commercial real estate development, but for Gregory Boler Jr., a recipient of the 2022 Developing Leaders Award, his career journey started with a mechanical engineering degree at Georgia State University. JLL’s Project and Development Services (PDS) Group interviewed Boler as part of an effort to recruit diverse entry-level talent in technical majors from historically black colleges and universities (HBCUs). He was one of four students selected and began his career working for JLL’s PDS Group in Atlanta.
“This was the only year that JLL’s PDS vertical recruited nationals at HBCUs, for which I’m grateful because I cannot imagine doing anything else,” Boler said.
Boler has a dozen years of experience in acquisitions, development, construction, leasing, asset management, and disposition. As managing director, of east region investments, Bridge Logistics Properties, his roles include sourcing and executing existing industrial acquisitions and new industrial developments. He currently manages several team members across the East Coast; his region stretches from Georgia to Pennsylvania and into New Jersey.
