Browse Month: March 2012

NAR 2012 Commercial Outlook: Vacancies Down, Rentals Rise Expected

NAR Commercial February 2012 forecast excerptReleased today was the February 2012 edition of Commercial Real Estate Outlook from NAR Commercial. Among the tables and graphs, report author George Ratiu, Manager of NAR Commercial Research sees a 2 to 3 percent general economic recovery rate and reports two CRE findings:

Vacancies were down 1Q 2012 

Beyond the decline in vacancies, job growth is a key driver of the demand for commercial space. Economists are forecasting a an increase in payroll jobs in the neighborhood of 2 to 2.5 million for the next two years based on GDP growth in the 2 to 3 percent range. A continued recovery for the commercial sector is projected in NAR’s February edition of the Commercial Real Estate Outlook.

Rental rates are expected to rise

As the economic recovery continues in the 2 to 3 percent range rental rates are projected to increase in both the residential and commercial sectors.  Commercial space completions have been below absorption, and demand for commercial space has started to increase.  Based on the currently available economic forecast, a modest rent growth for the commercial sector is projected.

See a copy of the complete report here.

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Pop-Up Retail: A Rising Retail Trend

The pop-up store — the short-term or temporary appearance of retail operations, inside or outside of traditional retail space — is a bona fide disruptive trend in retail space markets.  With so many changing expectations reshaping what was once a predictable lock-em-up business formula, how can landlords and reps handle the upheaval?  How can value be added, risk curtailed, and deals made?

The increase in temporary retail space is not chalked up to any single factor.  Local and national economic factors, a surplus of vacant retail space, and a rise in business flexibility afforded by wireless mobile technology are all working to create a different kind of opportunity.  Thinking past traditions like the five-year lease is a bare minimum.

Recognize the familiar The Halloween or Christmas store is already a familiar seasonal mall fixture.  Spring and summer are the season for bridal stores, and late summer is back-to-school territory.  Think of how these operators see the world and use space, and extend this thinking by looking for prospects who could be comfortable with that footprint.  Be prepared by considering allowances for sign-wavers or large banners to attract attention.

Understand all the online implications  The omnipresent mobile web enables tenants and space providers to use marketing concepts and to support retail operations undreamed of in the past.  Social networks, properly grown and tended, can put hundreds of people in a physical space in a tight timeframe with the right enticement.   Space providers can also add value by providing wireless internet access to tenants in temporary spaces to support point-of-sale solutions that these days can appear complete as single smartphones.  Remember to be ready for the online fallout: online mapping applications like Google Maps will keep listings longer than the store will be open.  Bring this up in negotiations and get ahead of the problem by writing better listing copy or by controlling listings appearance.

Be ready to bend, but not break the “rules”

Distressed downtowns are a big driver of the pop-up retail play. Because the need to handle risk doesn’t change fundamentally with pop-up – it’s going to be up to landlords in such situations to calculate the value of renting a temporary store mainly in order to turn the lights on in a darkened property.  With almost no exceptions, lights on is better than lights off, meaning a pop-up deal including tenant improvements might restore your mall to a showable state and even serve potentially as a loss leader toward gaining a long-term tenant attracted by the hubbub.   While the business norms of pop-up are still being defined, reduced lease terms do mean less likelihood of financing.  Foregoing financing means it becomes even more important to get the consumer-attracting parts right.  What might be a stretch today could not only be commonplace tomorrow, it could be the new definition of success.

 

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Multi-family Building Market, Meet The “Rentysomthings”

As we covered when economist Mark Eppli addressed NAIOP back in January, a series of economic factors (students coming back home and staying,  peaking home ownership rates, former homeowners heading into rentals) are causing more renting among more age groups and income levels than we’ve seen before.

But one term describing part of this that’s new comes to us from Europe.  They’re calling young professionals who earn too much to qualify for public housing but cannot afford to buy their own homes “rentysomethings”.

WSJ’s Doug Morrison writes:

While demand for European high-end property has held up in the face of economic turmoil, the lower end of the residential property market has not fared so well. But a handful of European institutional investors have spied opportunity amid the mid-market residential gloom. They are putting in place strategies to target suburban properties, far from the prime real estate of urban centers. And the U.K. rented sector is in their sights. In particular young professionals who earn too much to qualify for social housing but cannot afford to buy their own homes. The so-called “rentysomethings”.

Institutional investors had been conspicuous by their absence from the U.K. housing market of late but they sat up and took notice when Akelius, one of Sweden’s biggest property groups, announced plans to spend up to £1 billion in the market over the next five years.

Full article here.

 

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BOMA’s Henry Chamberlain Spells Out What’s On The Minds Of Owners

Affecting the commercial property market is the comfort level of building owners.  Nervous landlords add to deal volume and help to bridge the gap between bid and ask.  But what’s going through their minds? Answering is BOMA’s Chief Operating Officer Henry Chamberlain, who sees more uncertainty than he’d like.  In an interview following BOMA’s annual legislative conference that found the owners’ trade group pursuing an agenda concerning issues such as carried interest taxed as capital gains, ADA remedies, energy and leasehold depreciation, Chamberlain chalked up the murky waters for owners to finance on the debt side, the regulatory environment, and the leveraging of technology and its expected tendency to suppress demand for traditional office space of the future.

It’s worth mentioning that the trend of internet-based work forcing profound changes in office space needs going forward is one we’ve looked at here before; to hear BOMA leadership acknowledge the upheaval only underscores what’s coming in this critical commercial space market.

(Tip of the hat to reit.com for the video.)

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Video Hosting For Brokers And Property Managers: YouTube vs. Wistia

The rear LCD display on a Flip Video camrea

Once, CRE pros thought of video as a “someday” feature to add to online property marketing.  Someday is now, because prospects and landlords expect video on their desktop and mobile screens, embedded in listings. promoted with social media links, showing, selling and solving problems around the world and around the clock.

Once you’ve created the walkthrough videos and showcased your space’s benefits, amenities, location and improvements, the task of hosting the clips presents itself.  Video isn’t like photos — playback, (aka streaming), raises technical issues that images don’t.  Video files are far larger in data size than images, not as easily resized as images are on the screen, and not every device or browser supports playback of every video format.  Compared to video, photos are a cakewalk to handle.

Naturally, the software and services industry is working hard to take the hassle out of online video hosting.  New and established companies and services are here and more are coming.  Here’s a comparison of YouTube and Wistia, two video hosting options evaluated with an eye toward commercial real estate:

The War Horse: YouTube

YouTube remains the leader in hosted video online, serving an enormously high and growing number of video streams every second of every day.  Size and variety of content is one reason YouTube is the world’s second most popular search engine, (with parent company Google as the first).  As with every piece of content you put on the web, you need to make sure the YT video page’s text pieces – the video’s title and other data – all point cleanly to the subject so that searchers will find it.

YouTube works best for a “fire and forget” video hosting solution for property marketing.  Once uploaded, a clip gives a viewing user basic playback control, popover text overlays, reports on playbacks, optional comments, basic embedding and other features.  It’s a plain-vanilla war horse, and is free, but could be too crude a solution for property marketers.   A walkthrough video for a property can benefits from features that YouTube doesn’t offer.

Wistia – Not Just Playback

Wistia is a paid video hosting solution.  With the cost comes extra features that can help property marketers.  In addition to the fire-and0-forget basics offered by YouTube – hosting, the ability to embed in any web page, overlays – Wistia can do a little more:

  • Multiple Videos In One Player – Have a property with multiple vacancies?  Want to show the next vacancy right away without making the user leave the page, or the video?  The playlist feature has you covered.
  • Video Transcripts – Wistia supports the presentation of the video’s spoken audio track as text on the web page.  This is a giant benefit for searchers in finding the video as well as viewers of that video, because the transcript can be clicked on and used as a playback control.  Let a user skip to the warehouse part of a clip, or the parking, or the environmental controls portion.
  • Call To Action In-Player – Once the clip is through, a rich interactive call-to-action takes up the player.
  • Private Video Sharing – Easy to provide private, password-protected video content to clients or investors.
  • Customizability – Sporting a ton of customizing features that require no programming, just about any idea you have concerning presentation – triggering things on the web page at a particular point in the video, for example – can be built by a programmer.

 

So what’s your experience with online video hosting?

CRE Pros: Which Goggles Do You Wear?

SealMask watersport goggles made by AquaSphere
Image via Wikipedia

We had such a great response from The Source readers the other day, I had to go back to the well at least one more time.

Here at The Source, the entire length and breadth of commercial real estate practice is our beat.  Which is great in one way and a problem in another way.

It’s great because it means we have a lot of freedom to cover a huge industry from nearly any angle.

And it’s a problem because we’re not writing this for us, we’re writing it for you.  I want us to know more about what it is you guys and gals are looking for, how you see this industry and your roles in it.  That way, we can keep you coming back.

So here’s the question: What’s your focus in CRE?  To put it another way, which “goggles” do you wear?

Before you come back with “sales transactions” or “property management” etc. as your answer, consider the following idea.  I’ve found that CRE pros bring skills to the table that come from four general areas.  I’d like to know how you’d order your own skillset.  In other words, when you approach a transaction, what part of it is your passion?  What’s the angle you take?  What’s the first thing you’re thinking about?

The four areas are:

Accounting –  Financial analysis is in your blood.  There’s a CPA cert on your wall (or in your future), there’s pivot tables in your dreams, and you can’t be hoodwinked by anybody’s pro forma, or the tax man.

Law – Contracts are what you live for.  You never found a paragraph of fine print you couldn’t improve for yourself or for your client.  Where others see a lease, you see several possible futures.

Finance – Well over half of the work on every transaction is taken up with where the money’s going to come from.  You not only know where it comes from, you know where it’s been, where it goes, why, when, and how.

Deal Structure – Here, it’s people and how they interrelate and operate. You think: It’s one thing to know the difference between a fee simple estate and a leasehold.  But it’s something else to build a partnership or structure a joint venture to balance monetary commitments or tax benefits.

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