Browse Month: June 2011

Industrial Players All Smiles at NAIOP I.con Conference – Part 1

Today’s Guest Blog Post is Part 1 of 2 from Ben Johnson, Vice President at Cole Capital.

Industrial real estate owners, developers and brokers are in a buoyant mood these days, a fact reiterated by a record crowd of some 300 industry pros who attended the recent two-day NAIOP I.con conference in Long Beach, Calif.  This year’s conference attracted some of industrial real estate’s heaviest hitters, including Jack Fraker, vice chairman and managing director of investment properties at CB Richard Ellis, Jim Dieter, executive vice president /industrial operations/brokerage at Cushman & Wakefield and Craig Meyer, managing director and head of industrial and logistics services at Jones Lang LaSalle.  The event kicked off with a bang, addressing what has become the most popular topic expected to impact the industrial market in the years ahead: the widening of the Panama Canal, which is scheduled for completion on the canal’s 100th anniversary in 2014.

The wider canal will accommodate larger ships, and many pundits believe that will reroute more trade from West Coast ports directly to their East Coast brethren. In advance of the canal’s opening, U.S. logistics and trading patterns have already begun to shift, and West Coast, Gulf Coast and East Coast ports are in a pitched battle for the business ahead.  Curtis Spencer, president of logistics consulting firm IMS Worldwide, chaired a panel including representatives from three of the country’s largest ports. Spencer noted that recent trends are tending to throw cold water on earlier predictions of the Panama Canal’s influence as a true “game changer” for U.S. logistics. “It was cheaper going by water (Asian goods moving directly to the East Coast through the Panama Canal) before the recession, but that’s not the case anymore,” said Spencer.

There are several reasons for the change, he noted, including reduced shipping speeds to save fuel (so-called “slow steaming”), rising fuel costs, environmental concerns and time to market versus costs.  The real battleground, according to Spencer, will be in the U.S. heartland, where retailers coordinate the increasingly complex handoff of goods arriving at logistics centers on their way to consumers.

Jim MacLellan, director of marketing at the Port of Los Angeles, said the port has clawed back much of its trade losses during the recent recession, and is concerned about higher fees for cargo moving through the Panama Canal and the impact of slow steaming. “The shift in trade to the East Coast and Gulf Coast ports will be gradual,” said MacLellan.  One of the more interesting/unusual factoids coming from the conference was the notion that pirates could tip the balance of world trade, at least in the short term. The spate of Somali pirates attacking ships coming through the Suez Canal (the primary shipping route for cargo moving from Asia/Singapore west to the East Coast of the U.S.) has “jacked up” insurance rates for shippers over the last year, said MacLellan. As a result, many Asian manufacturers are once again favoring shipments across the Pacific to the Western U.S.

However, there are at least two sides to every argument.

“I feel like I have to defend myself here,” said Kevin Burwell, director of the Virginia Port Authority. “We should call this the bring Curtis to Jesus meeting,” referring to Spencer’s belief that East Coast ports will not benefit as much from the Panama Canal widening as originally expected.  Burwell believes the Port of Norfolk, for example, could see half a million or more TEUs (twenty-foot equivalent units, a standard measure of cargo) from the Panama Canal after 2014. “We’re going to be a fortunate recipient of the canal’s widening, but it won’t happen overnight,” said Burwell.  Meanwhile, in the Gulf of Mexico, the Port of Houston is “right in the middle,” said John Moseley, general manager of trade development at the Port of Houston Authority. At the end of the day, industrial real estate location is about cost and proximity to the consumer, and the Texas economy is growing at a record clip,” said Moseley.

Note: Stay tuned for part two of Ben’s  post with I.con coverage tomorrow

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Meth Labs and Property Management

Guest Blog Post by Karen Altes, Senior Manager of Online Communities for the Institute of Real Estate Management (IREM).

Meth is a highly damaging problem within residential properties, and the problem is on the increase. The combination of the ingredients used in the manufacturing of meth creates toxic contaminants that are absorbed into walls, flooring, and ventilation systems.

Once discovered on a property, a meth lab cleanup needs to be handled swiftly and professionally. The US Environmental Protection Agency offers guidelines for the remediation of former meth labs in the document Voluntary Guidelines for Methamphetamine Laboratory Cleanup.

Following a typical meth lab bust and after the police have removed the chemicals and equipment, the local health department will write a condemnation order and order the property owner to clean up the affected area. Cleanup costs can run between $5,000 and $30,000, plus the loss of rental income during the one- to two-month cleanup process. Although technically the resident is responsible for this cost, in reality most residents who are using or manufacturing meth do not have financial means to cover cleanup costs.

Given the liability assumed by property owners in terms of the cost of cleanup and the risk of exposure to new and existing tenants, the best way to protect your properties is prevention. Screening residents is the first line of defense; ask for proof of employment, credit history, criminal background checks, and landlord references. Having regular site inspections – once or twice a year at a minimum– is another important step property managers can take.

Hands-on professional property management can help avoid destruction of your properties, and is a must to navigate the complicated decontamination process should a meth lab be discovered. Have you had to deal with meth lab remediation at your properties?

For a more in-depth look at this subject, read the article “Meth: Is It the New Mold?” from the May/June 2011 issue of the Journal of Property Management (JPM®).

Introducing….IREM

We’re introducing a new regular feature to The Source, guest blogging by one of NAR’s Commercial Affiliate organizations, the Institute of Real Estate Management.  The following was contributed by Karen Altes, Senior Manager of Online Communities for IREM.  We invite you to comment and ask any questions you have for IREM.

NAR Commercial has invited us, the Institute of Real Estate Management (IREM®), to start contributing here on The Source. We are incredibly excited about this opportunity, and we wanted to use our first post to introduce ourselves to you.

IREM has been a trusted source of knowledge, advocacy, and networking for the real estate management industry for over 77 years. We offer training and credentialing all over the world – we have chapters in six countries in addition to the US and work with international partners in seven more. Our nearly 18,000 members are site managers, property managers, portfolio managers, asset managers, and real estate company executives. They manage all property types, from conventional apartments to commercial office buildings; from federally assisted affordable housing to industrial parks; from single-family rentals to retail shopping centers.

IREM offers several credentialed memberships for property management professionals:

IREM also offers Student, Academic, and Associate memberships.

Real estate management is growing steadily as a profession due to the overall growth in the number of all types of buildings, the larger percentage of real estate considered investment property, and increasing awareness that management of real estate assets requires special training and education. We look forward to contributing here on a variety of topics related to our segment of the commercial real estate industry.

We’ll be a regular feature here on this CommercialSource.com blog  – by collaborating, we can share and learn from each other, and together become a stronger voice for our industry.  Thanks for having us!

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Commercial Real Estate Market – Getting There…

…that’s what lenders, brokers, developers and other real estate pros put forth as the state of the market this week at the RealShare Chicago conference.  RealShare is a regional series of events produced by Real Estate Forum and GlobeSt.com; this session included a “town hall” from industry leaders and four panel discussions on office, multi-family and opportunities in distressed assets and debt. 

In the office real estate market, sounds like there may be construction in the offing in some markets – although it’s some time away in Chicago.  Current inventory in many cities is old or has issues.  Most panelists prefer urban over suburban office space and say smaller space over larger is more likely to get financed. 

Getting capital is getting easier, but pre-leased buildings give one a good leg up and landlord performance is as important as any aspect of the deal.  As far as where funds are coming from and how long it takes to close, Fannie Mae and Freddie Mac are in the game as a growing source of capital.  These agencies will be restructured, but no one thinks it will happen soon, and no one seems sure of what they will look like.  While still conservative, Fannie and Freddie are more willing to look at waivers and have eased somewhat on leverage, insurance coverage and rents.  Life (insurance) companies are getting back into the game and there’s some CMBS lending as well as private financing.  As more players enter the market – vying for assets – competition is beginning to build.  Expect new deals and any new construction to take 9 – 12 months to close and refinancings and non-FHA loans to take 6 – 9 months, and a 65% LTV equals easier financing.

The multi-family rental market looks good. Rents are going up with favorable Chicago neighborhoods having risen from $1.85 to $2.04 sq. ft. in the last several months alone, and A properties at $2.50 or more.  Demand for rentals throughout the nation will continue as Gen Yer’s come into the market – the largest group since Baby Boomers.  2011 and 2012 will continue to be good for rents, but look for more building by early 2013.  Apartment owners are happy as clams and there is some relief as capital is becoming more available.

Conference presenters said they thought they’d make more money in distressed, but pointed out that this market cycle has not been the same as earlier down-turns and banks have managed assets differently. Distressed properties are being worked through the pipeline with most lenders having geared up work-out departments rather than working through foreclosures. While big banks have dealt with their portfolio problems, community banks have a way to go and many re-financings remain through 2014 – capital management is the name of the game for them.

Generational Differences CAN Mean Success in Commercial Real Estate

Do you remember when Elvis Presley joined the army? How about when Kurt Cobain died? Or when Justin Bieber cut his hair? The answer indicates whether you are a Baby Boomer, Gen X’er or Millennial–and also determines how you should interact with your potential client.

Paying attention to generational differences pays off – generations function differently in the way they conduct business, communicate, and utilize technology.  I came to realize I needed to learn more about generational differences to ensure that I was connecting in the best way with my clients.  It’s made a real difference, and the knowledge has given me a significant advantage.

I spoke on this topic last month at the NAR Midyear Legislative Meetings in Washington D.C.   For many at the NAR Commercial Leadership Forum, it seemed it was the first time many were considering how understanding generational differences could help their careers.  I was excited to experience how receptive they were to this information – in the end, it’s really about “you”!

The first thing I encouraged the audience to do was to figure out what generation group they were part of and how it differed from the average buyer.   Here’s the cheat sheet:

  • Millennials (or Gen-Ys): 15 to 29 years old
  • Gen Xers:  30 to 46 years old
  • Baby Boomers:  47 to 65 years old

An understanding of which group you belong to helps you better understand yourself and what you have to do to connect with the other groups.  Trust me, understanding the differences IS the difference between average customer service and being a top producer.

Here are some key characteristics of the groups as identified by the PEW Research Institute:

Millennials (or Gen-Ys)

  • Technology and path driven
  • Want to move up the ladder quickly; will do what it takes to make this happen.
  • Want to know what the next ring on the ladder is and how fast they can get there!
  • Quickest to incorporate new technology into their everyday life.

Gen Xers

  • Identifies technology, work ethic and a good balance between work/home life.
  • Likely to be more entrepreneurial and creative.
  • More likely to involve friends in their decision making process.

Baby Boomers

  • Identify work ethic, respect, values and morals as defining characteristics of their generation.
  • Thrives on individual reward, hard work and a strong career focus.
  • Sometimes tend toward being workaholics.

I led the discussion to how understanding the differences can build your business.  With a Baby Boomer – who values hard work and respects loyalty, you’ll focus on your experience, your time with your current company and your knowledge of the real estate market and how you have been successful in your career.

The new wave however will be the Millennials.   You’ll find that their respect must be earned on the specifics of your dealing – not your experience and long term in the industry.  A Millennial will look for pros who embrace technology and show how they utilize it to communicate and conduct business.  They’ll be looking for the quickest and best way to find their new investment and don’t want to waste time.  They multi-task and will expect you to do the same.

Don’t expect to reinvent yourself, but understand who you’re dealing with and what might help you best connect.  The Millennials have embraced technology, social media, and the smart phone. They utilize text messaging and they don’t want a phone call.   Your deal may just depend on your sending a text or follow up on Facebook!

NAR Commercial Guest Blogger:  Mike Vachani, MBA, CIPS, ABR, President, Provenio Group, Inc. – Monrovia, CA – Arcadia Association of REALTORS® Member (CA)

To contact Mike, you can reach him at [email protected]

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NAR Supports S. 509 Increasing Cap on Credit Union Member Business Lending

Tomorrow the Senate Banking Committee will be holding a hearing on S. 509, the “Small Business Lending Enhancement Act of 2011,” introduced by Senator Udall (D-CO).  This legislation will increase the cap on member business lending (MBL) from 12.25% to 27.5% of total assets for well-capitalized credit unions and allow these community-focused institutions to play a more significant role in rejuvenating the nation’s economy.

S. 509 creates a new source of capital to refinance the nearly $1.2 trillion of commercial real estate loans with balloon mortgages maturing over the next few years thereby helping to prevent the commercial real estate sector from holding back the nation’s economic recovery.

In essence, most REALTORS® consider themselves a small business and this bill will also have benefits beyond the commercial real estate sector.  It would increase access to desperately needed capital for the small businesses that employ nearly half of all Americans and account for 60% of U.S. job creation.  Lending to small businesses declined $43 billion last year, and community banks, which hold 52% of all small business loans, were accountable for nearly half of that drop.

Most of what you have read in this post so far and more can be found in a letter submitted to the Chair and Ranking Member of the Senate Banking Committee today in response to the hearing tomorrow.  NAR strongly believes credit unions have the ability to help fill the commercial real estate and small business lending gap.  If S. 509 is signed into law, the Credit Union National Association estimates that credit unions could lend an additional $13 billion to business in the first year after implementation, helping to create 140,000 new jobs.  This bill will not cost the U.S. taxpayer a single dime or increase the size of government.

Get involved today.  Register on the REALTOR® Party Action Center to participate in Calls For Action and invest in the REALTORS® Political Action Committee (RPAC) joining a multitude of other REALTOR voices on important pieces of legislation like S. 509 and many others.

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GAO Recommends Updated Guidance for Commercial Lending

On May 19, the Government Accountability Office (GAO) recommended updating and clarifying commercial real estate lending guidance that was originally issued in 2006. According to GAO, changes in the commercial lending market since the financial crisis, including increased delinquincies, problems with securitization, and an increased reliance of small banks on CRE loans, have created a need for clearer and more consistent guidance. The call to modernize the guidance comes in the wake of a recent study that found some confusion and inconsistency in the application of the 2006 guidance.

The National Association of REALTORS monitors these kinds of reports for consistency with established NAR policy on commercial real estate lending.  We highly encourage you to check out the fine print on your NAR advocacy ‘insurance policy’ and read the NAR Commercial Real Estate Lending Issue Summary that includes all of the legislation and regulation supported and opposed based on that position statement.   Watch the NAR Government Affairs Washington Report for the latest breaking news (and there is so much) each week on all commercial real estate issues in DC.

The full GAO report is available at www.gao.gov/new.items/d11489.pdf

 

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Overcoming Obstacles and Picking CRECHAT Winner

Today’s lively #CRECHAT was superbly moderated by David Stejkowski, a commercial real estate attorney in Chicago, IL.   With a topic of “Overcoming Obstacles in Commercial Real Estate Transactions”, the twitter stream was abuzz with commentary on  lending issues, use of social media in relationship building versus marketing, technology tools like iPads and DocuSign, and the general perceptions about the commercial real estate market.

We’d like to hear from you – what obstacles are you faced with in commercial real estate transactions in today’s market?

 

Watch below to see who gets to take home this week’s book, The CEO of YOU.

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Congratulations to the winner and “HAPPY BIRTHDAY” to REALTORS(R) Signature Series Speaker Marsha Petrie Sue.

A special THANKS to the street performing team, “The Kings of Michigan Avenue”, for helping us pick a winner today.

 

To view a recap and read the tweets – go to www.crechat.co – and bookmark the site, so you can return next week at 2pm EST to join in on the conversation.

RECon CRECHAT Prize Winner!

After a little extra time to process and post, we do have a winner!

And….we thought it most fitting to pick the winner Vegas-style, since ICSC RECon was held in Las Vegas!

Congratulations!

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@RVABusiness, you have won a copy of Signature Series Speaker Drew Stevens’ book “Split Second Selling“.  Send us a DM via @commsource on Twitter with your mailing address and we’ll get that to book to you!