Browse Month: September 2013

Michael Bull: Bullish On Owning

Michael Bull, Bull Realty. Twitter: @BullRealty

In a kind of perfect storm of commercial real estate media, this week found Michael Bull radio and web host of the nationally syndicated Commercial Real Estate Show a guest on NAR’s Commercial Connections Podcast hosted by Alex Ruggieri.  The topic: market conditions for office and industrial are pointing users more than ever toward buying and away from leasing.  The quick takeaways:

Buying Beats Rent Today Because…

  • Low replacement cost.  Especially in suburban office markets, properties priced at $50/sq. ft. below replacement cost are widely available
  • Low interest rates.  From federal programs providing 10% down terms and conventional loans with lockable rates, the credit picture is rosy, says Bull.
  • Also helping is the classic love lenders have for owner-occupiers.  Problem loans in CRE were usually to parties who had nothing to do with the business.  Beyond that, banks are angling for deposit and services business, and an owner-operator is more likely to be in the need for banking services.
  • Owners can borrow on equity down the road
  • Bull mentions that leases in some cases don’t look as attractive as they once might have.  Recent changes in lease accounting rules from FASB means that leases are no longer off a prospective renter’s balance sheet.  Buyers don’t face these new rules changes
  • Controlling occupation costs, the business environment and creating a great investment property are all common goals in buying
  • Bull tells a great story about education magnate Stanley Kaplan and listening to the business advice of accountants

Listen to the full Commercial Connections Podcast here

 

Using Google Earth For Property And Data Visualization: Three Great Examples

The data visualization business has long been critical to commercial real estate dealmaking. At the deal table, all the pro forma work, diligence and sales skill brought to bear can be for naught if, at the critical time, you’re still telling the client when you should be showing the client.

Today’s resources have lowered the barrier to data visualization in eye-popping ways.  There has been a wave of Google Earth maps joined with 3-d animation to produce sales tools showing space and property – here are three.

Chicago Growth Animation 1862-2014 

Midtown Manhattan, 1850s-2014

San Francisco Market Street Corridor 1877-2013

 

How Do I Use Google Earth For Data Visualization?

Got distance, area and 3D measurements on your desk?  Chance are you wouldn’t be in commercial real estate if you didn’t. Using Google Earth to visualize these begins with Google’s Google Earth Pro product, an offering of the tech giant that includes movie creation, measurements and mapping of multiple points and more.  Trial versions and free versions exist and are, as is often the case with Google technology, surprisingly powerful.

 

Yelp And Commercial Real Estate: Do Reviews Work?

Image representing Yelp as depicted in CrunchBase

Probably best known for its ratings of retail businesses, Yelp is an online marketing powerhouse that leverages the reviews of ordinary customers into a highly trafficked, localized website.  It’s a huge success because of the way Yelp has become a destination for people making a choice about something they need.  The information on Yelp is to a great degree expected to be “organic” – real people making real reviews – and Yelp is only an “aggregator” or collector of this information.

We’ve seen that Yelp is by no means limited to retail. Professional services also use Yelp to drive business.  And yes, commercial real estate professionals are on board right along with the doctors, accountants and lawyers.  Each local Yelp has a commercial real estate category, and with it, potential new clients facing a CRE challenge and looking for help can find brokers, property managers, condo associations and other industry professionals and groups easily.

While it’s not news that marketing professional services on Yelp is popular, Yelp has been in the news lately for one unfortunate side effect of its business model: gaming of the reviews.

Yelp’s Own Proposition

Yelp’s business model and revenues depend upon clients paying for advertising on the site.  In the past, Yelp has used positions of positive reviews as leverage in the sales conversation.  Until 2010, users could pay Yelp for a feature to have a positive review displayed on the top position of a company’s page, which was seen as getting in the way of Yelp’s claims of neutrality and publishing of “organic” reviews.  Yelp was also taken to court in class action suits, winning a dismissal in California against claims that Yelp’s own sales team was strong-arming prospective advertising clients by suggesting that failing to advertise would cause positive reviews from appearing altogether or appearing high in results.  New suits over this alleged practice have been filed in Connecticut.

Astroturfing

This week, two developments cast more shadow on the neutrality of Yelp’s reviews. After a year-long sting operation, the New York Attorney General dished out more than $350,000 in fines to 19 companies found to be paying “reputation management” professionals to write fictional reviews on Yelp (as well as Google Local and CitySearch). From the NY AG’s office:

“Operation Clean Turf,” a year-long undercover investigation into the reputation management industry, the manipulation of consumer-review websites, and the practice of astroturfing, found that companies had flooded the Internet with fake consumer reviews on websites such as Yelp, Google Local, and CitySearch. In the course of the investigation, the Attorney General’s office found that many of these companies used techniques to hide their identities, such as creating fake online profiles on consumer review websites and paying freelance writers from as far away as the Philippines, Bangladesh and Eastern Europe for $1 to $10 per review. By producing fake reviews, these companies violated multiple state laws against false advertising and engaged in illegal and deceptive business practices.

The second development: this month, a pair of assistant professors at Harvard and Boston University have issued research claiming that upwards of 20% of Yelp reviews are fake. 

The Implications

It doesn’t take much thought to conclude that astroturfing, false advertising and deceptive business practices have no place in our industry. Ethics are not an option, and reputation is, in the end, the most important thing a commercial real estate professional brings to the table.

That said, I don’t think we should simplistically assume that new forms of advertising and marketing such as Yelp are tainted or inappropriate purely because they can be. Particularly among younger demographics, Yelp is reaching people at rare and critical moments in their lives and careers. Which means that the success of Yelp’s positioning is something to take very seriously  – as seriously as professionals in this industry take their “old school” reputation management tactics of adding value, providing expertise and just doing a bang-up job for clients.

What’s Your Story?

In light of  questions about neutrality and organic results, should commercial real estate professionals participate in Yelp?  Has your office or the office of an associate gotten positive results from Yelp listings, reviews or advertising?  Negative experiences?  Drop us a comment and let us know.

Tokyo’s Olympic Stadium Retrofit Plan

2020 Tokyo Olympic Stadium PlanThe cost of developing a new structure from the ground up will just about always eclipse the cost of retrofitting a new one.  In crowded Tokyo, where land couldn’t be at a higher premium, that rule was in full effect when the city won its $5 billion bid for the 2020 Olympic Games.

The plan revolves around a retrofit of the Olympic stadiums built for the 1964 games, which ushered Japan back into the post – World War 2 international community with a exultant splash and global attention through satellite TV coverage.  Planners expect similar payoff for the city but this time with far less capital outlay than is common for Olympic development projects.  The 2012 London games came in at a total cost to the UK of $12 billion, while the 2014 Winter games in Sochi, Russia are expected to cost a jaw-dropping $50 billion.

Though plenty are questioning whether the economic commitment could worsen Japan’s ongoing recession, Tokyo’s bid is a smarter, leaner vision of what’s traditionally expected of Olympic host cities. Rather than building entirely new venues, they’ll retrofit existing structures throughout the city—including the same stadium built for the 1964 Games, which will get a dramatic makeover by Zaha Hadid.

Working with the structural bones of the old stadium, Hadid will add a retractable roof and other contemporary perks—and save the city millions in the process. Two other 1964 venues (Nippon Budokan and the Tokyo Metropolitan Gymnasium, seen below) will also be used for the 2020 Games, and thanks to Tokyo’s excellent transit system, the city won’t need to invest much in new train and bus lines.

There will also be dozens of new structures built, but almost all of them will be wedged into downtown Tokyo to reduce transit times and energy costs. A compact Olympic Village will be built on Tokyo Harbor and, when the Games wrap up, it will be converted into housing. This plan has its roots in the 1960s, at least conceptually: In 1960, a young architect named Kenzo Tange proposed the construction of a massive housing development across Tokyo Bay. It was never built, but the plan influenced urban design for decades to come.

The plan leans heavily on retrofitting – check out the proposal video from the architect to get a sense of what’s on tap for Tokyo.

 

Marketing Medical Office Buildings With Video

The overlap between health care and commercial real estate is a special territory that requires traditional broker/agent/manager skills be directed and shaped to serve the needs of medical practitioners.  Doctors on both the buy and the sell side of medical office property deals stand on unfamiliar ground as they feel the pressure of medical consolidation and other trends in health care in a post-Affordable Care Act world.  Real estate professionals need to know how to help.

Delaware County, PA brokers Jacobs Realty Group seem to have a handle on the problem.  I recently noticed their video promoting brokerage services to the medical office building marketplace and thought they had hit it out of the park.   It’s an example of great success in messaging to this unique market.

Breezy without being cloying, informal without being useful, and fully aware of the office property challenges many doctors face.  Not too short, not too long and so ideal for social media.  If you ask me, medical office property marketers across the country could take a tip from their example.

 

8 Traits to Dominate

Rod Santomassimo, founder of Massimo Group

It’s not everyday that we get to talk to a Amazon best selling author, but on the most recent Commercial Connections Podcast our host did just that. Rod Santomassimo,  author of “Brokers Who Dominate” and founder & president of The Massimo Group has a 15 minute conversation with our host Alex Ruggieri in which he goes over the traits from his D.O.M.I.N.A.T.E. system that have helped shaped the top producers in the North America approach their careers.

Listen or Download the podcast here.

Next-Gen Medical Research Facilities Rethink Foot Traffic

brighamandwomenshospitalbrighambuildingforthefuture
Brigham Building For The Future

Since breaking ground in 2013, Boston’s Brigham Building For The Future is a project that has been turning heads around the medical property community for its unusual approach to specialization and foot traffic.  The 11-story, 620,000-square foot project is located on the campus of Brigham and Women’s Hospital in the city’s Longwood Medical Area and will house nine floors of medical research with two floors of medical clinic area.

A major premise behind the research building design according to architect NBBJ is to support what’s called translational research — a modern conception of scientific research that, in short, makes immediate bridges from the scientific work to the practical applications.

What’s New In Space Allocation

Traditionally, most medical research takes place in spaces separate from clinical spaces.  An invention or innovation in medical care can take years to develop and further years to be applied to patients. Translational research is a way to radically shorten that extra time by quickly “translating” findings in basic or pure research into meaningful health outcomes.

The building design that supports translational research is one that intentionally mixes foot traffic flows.  From a property management standpoint, the usual medical office principles of space specialization are turned on their head: the intent is to put researchers and doctors in the same spaces, the same hallways, the same atria, the same conference rooms.

NYU’s 227 E. 30th St.

Exemplifying the trend is another early adopter in New York.  New York University’s Langone Medical Center’s Translational Research Building.   Stressing the integration of space users of both medical/clinical and research purposes, the building houses a great deal of “dry lab” research space — labs that more resemble traditional office space in that the bulk of the work is done on electronic or computer equipment and not “wet” test benches with flasks and bunsen burners.

Patients Included

As health care continues to evolve in the US, the responsibility levels of both providers and patients for improving outcomes is on the rise.  Because US health care costs too much and produces too few positive health outcomes when compared with other world democracies, it follows that health care needs to become a smarter conversation and collaboration between patient, researcher and doctor.  By rethinking clinical space, translational research spaces facilitate these conversations uniquely.  At the same time, they provide efficiencies of space that the entire industry is seeking, expressed in waves of medical office consolidations.  Expect to see more of these kinds of translational research medical properties in all markets as US health care continues to evolve and improve.

Enhanced by Zemanta

How To Get 1031 Exchange Data From The IRS

Seal of the United States Internal Revenue Ser...

An earlier post here at The Source about 1031 exchanges of property under IRS “like kind” exchange rules drew a bunch of comments and interest in the data. Readers wanted to know: does the IRS perform or compile 1031 studies? Do they publish regional studies of these exchanges under IRC 1031?

So I opened up a channel to the IRS’s Statistics Of Income Division (SOI) and asked these questions back in December. I then received and shared a whole ton of national data on 1031 exchanges from 1995 to 2010.  While the volumes of 1031 exchange deals and splits were nice to see, the IRS did not provide regional breakouts.

I received some additional comments on that post last week, asking if Uncle Sam had a) updated the data to reflect 2011 or later or b) put together regional reports.

Since it worked so well last time, I headed right back to the SOI Division and asked for any updates.  And once again, a friendly specialist responded with lightning speed:

Thank you for contacting the Statistics of Income (SOI) Division regarding the availability of 2011 and 2012 Like-Kind Property Exchange data.

The most recent Tax Year 2010 Form 8824 – Like-Kind Property Exchanges data – are available on the Tax Stats section of the IRS web page at http://www.irs.gov/uac/SOI-Tax-Stats-Business-Tax-Statistics. We do not have a release date for the 2011 data, but it will be available on this web site when it is released.

We do not compile a geographic history of such exchanges for any period and future data will not have geographical breakouts, only national totals.

So there you have it: no publication date is set for 2011 data, but if last year is any indication, I’m expecting it by December.  And it turns out that Uncle will not be indulging us with regional breakout reports.

That said, the above IRS web page is a treasure trove of national data on business taxes.  What economic or market indicators exist in the links?  That’s up to you to find out.

Enhanced by Zemanta

Chinese Investment In US Commercial Real Estate On The Rise

asian-investment_0409Mainland China’s investors have hiked their rates of investment into US primary commercial real estate markets.  Eclipsing rates of investment by  Malaysia and Hong Kong for the first time, the Chinese mainland has for the first time sourced more capital for US CRE deals than its Asian neighbors and shows no signs of backing off.

Driving the trend in part is China’s insurance industry, which has experienced explosive growth in the 21st century. The risk business in China is one of the clearest examples of capitalism’s power to reshape expectations.  In 1999, China’s then $10 billion in life insurance premiums took a mere seven years to grow to $46 billion, and the industry is still considered in its infancy.  Fed by IPOs and joint ventures with foreign insurers (such JVs having been prevented by government regulation before China’s adoption of the World Trade Organization (WTO) frameworks), the actuarial arts are now an eye-popping feature of the Chinese economy.

In much the same way western insurance giants act as traditional institutional sources of investment capital for commercial real estate projects, China’s insurance companies are on the hunt for high-quality commercial property assets wherever they can find them.  Domestically, there are indicators that China’s best properties in the primary markets of Chongquing, Shanghai, Beijing and Tinajin are unavailable for this mountain of cash, and that fears of overbuilding in China’s secondary and tertiary real estate markets are leading China’s institutional investors to look for commercial property returns overseas.

Interactive Map

 To get a sense of the importance of Chinese capital to US real estate, numbers sourced from Realtor.Org and codified into an interactive map are worth a look: China figures in the top 5 of most US major state CRE markets:

Where Are Foreigners Buying Real Estate in the United States

 

Recent Examples Of Chinese Capital Funding US CRE Deals

From the Bronx to Chicago’s CBD to California, China’s US commercial real estate investment has picked up steam in 2013.  From Forbes:

Deep pocketed Chinese investment firms are out shopping for commercial real estate.

“Those in our network tend to look at commercial property in the $10 million to $25 million range,” said Lu.

Right now, Chinese investors see the U.S. as a bargain following the worst foreclosure crisis since the Great Depression.  In fact, some cities and towns across the country are cheaper than properties in Shanghai and Hong Kong.  Home prices in the U.S., coupled with economic uncertainties and tight regulations designed to curb a housing bubble in China, are driving record Chinese investments in the U.S. residential and commercial real estate markets, according to the Asia Society, a multinational think tank with offices throughout the U.S. and Asia Pacific.

For instance, Chinese commercial real estate purchases in the U.S. totaled over $3 billion in 2012, much of it in California.  The state is expected to see record investments by the Chinese in 2013, the Asia Society said.  Two sizable deals took place this year already.

China Vanke and Tishman Speyer signed a deal for a $620 million luxury condo project in San Francisco this winter. In April, another deal for a cool $1.5 billion was inked in Oakland between Zarsion and Signature Development Group.

In June, several big deals in New York City went down. Zhang Xin, CEO ofSoho China , joined forces with the wealthy Safra family (of Banco Safra fame) of Brazil to buy a stake in the General Motors GM +1.92% Building in Midtown, The New York Times reported on June 25. Dalian Wanda Group, another Chinese developer, is planning to build a greenfield luxury hotel in Manhattan.

The Big Five Chinese Insurance Companies

On the hunt for capital?  These firms are on the hunt for US commercial property pro formas and the returns they promise:

(Chart: South China Morning Post)

Building Environmental Performance Improving, Says Urban Land Institute

uli-greenprint-center-logo

Strategic partners, owners and investors of real estate worldwide make up the Urban Land Institute’s Greenprint Center, a project committed to improving the relationship between all real estate and the environment. The Center is an intersection of modern building management and industry muscle drawn from CRE and finance that focuses on reducing the carbon footprint of existing buildings, which currently represent one-third of global carbon emissions, and works to achieve its carbon reduction goals through education and action.

What’s A Carbon Footprint?

A building’s carbon footprint is the amount of carbon dioxide and other carbon compounds it emits due to the consumption of fossil fuels by tenants or general building operation. Emissions from buildings make up a third of the carbon emissions across the world, and despite what daytime talk radio entertainers keep repeating, the scientific consensus is overwhelming that “greenhouse gases” and the heat exhaust from properties do add up globally to a whole host of negative environmental effects including radical weather patterns.

Mangement

In business terms, addressing a building’s environmental  performance is just another problem of efficiency, of finding areas where efficiency is lacking and applying sound management practices to get the numbers moving in the right direction.  In short, this is the ULI Greenprint Center’s entire mission.

The Center’s latest report (full PDF available here) suggests that management is getting the job done.  Cost of energy fell by 3.2% as real estate owners and managers in the Center’s portfolio also booked significant performance gains in carbon emissions reduction and energy consumption.  The recycling rate picked up over eight percentage points to sit at 21.4%.

Other categories were less dramatic – the Center moved the needle on occupancy/density to the tune of a 1% increase, while water usage rose by half a point.

Getting Serious, Getting A Handle

Since our most productive economic engines are housed in commercial buildings, it falls to property owners and managers to act as stewards for that economic activity, to steer the ships and watch out for threats on the horizon.  That activity is a great power and it comes with a great responsibility to do everything we can to manage the byproducts of that activity.  Photos and video from cities in mainland China, choked with smog, are a stark reminder of what badly managed economic growth results in. Moments of doubt concerning carbon emissions are maybe understandable when the carbon’s invisible.  But when the carbon is thick enough to where you can’t see in front of your face, it’s long past time to get serious and recognize the deepest threats to property ownership and sustained economic power come not from scientists and environmentalists, but from bad management.

  • 1
  • 2