Browse Author: Wayne Grohl

Wayne enjoys shelter, food and commercial real estate.

NAR Commercial Practitioners: Call For Brief Survey

Logo of NAR's MVP participation rewards programAttention commercial REALTORS®: From July 16-31st 2012, NAR commercial members are called to participate in a brief survey by NAR’s Research Department.

As part of the NAR’s Member Value Plus (MVP) Program, where REALTORS® earn rewards for participation in actions geared to improve our industry, today’s call is for a brief survey of your business activity and what you see in your marketplace. This survey is an extension of the monthly REALTORS® Confidence Index Survey and annual Member Profile, meaning results will of course be shared with members and in other venues.

To participate, you must have a valid NRDS ID number and e-mail address.

The Reward

In exchange for participation, NAR is offering a reward of a free download of the 2012 NAR Member Profile.  What’s in it? Plenty of valuable intelligence and networking:

Who are REALTORS®? Economic, demographic, education, tenure, agency relationship and compensation of REALTORS® are broken down. In addition, this report takes an in-depth look at office affiliation, type of firm, as well as the use of the Internet and technology. This unique tool provides the answers in a user-friendly format, designed to allow easy comparisons with previous studies, using a mix of charts, graphs and tables.

You have until August 31st, 2012 to claim your Reward in the REALTOR.org/Store. You will receive a promotional code to utilize in the Store to receive your reward via e-mail within 48 hours.n in-depth look at office affiliation, type of firm, as well as the use of the Internet and technology. This unique tool provides the answers in a user-friendly format, designed to allow easy comparisons with previous studies, using a mix of charts, graphs

The Survey
Got your NRDS number handy? Is it before July 31st 2012?  Ready to earn a reward?  Then begin filling out the survey here.
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SBA Financing For Small Business Office Purchases

 

Loan
Loan (Photo credit: Philip Taylor PT)

Today’s wariness of banks and private lenders to finance commercial real estate transactions is widely reported as this industry’s leading challenge as it comes out of the recession.  There are many reasons given why bank lending volume isn’t where it should be, but at the core, credit availability depends on lenders being good at assessing risk. It’s not as if the country’s largest banks have earned the most sterling reputations when it comes to evaluating, securitizing and financing real estate risk — the recession itself speaks here.

No matter how the times got tough, it is absolutely critical to maintain the flow of credit during and following an economic downturn.   That’s one role of the Small Business Administration’s SBA 504 program: to provide access to capital and to shoulder risk when our pinstriped friends find themselves otherwise concerned with problems of their own making.

Can Your Clients Benefit From SBA Lending?

In the Associated Press piece “Small Business Boom Spurred By Government Support”,  the issue of capital access through SBA in rough economic seas is laid out in plain terms:

Since 1959, the SBA 504 program has been offering a form of government support to small business and to banks simultaneously by reducing the risk assumed by the bank.  The result is credit available to the small business during those times when it is needed most.

The amount of small business loans under the SBA 504 has risen 16% per year in the three years following 2009, adding up to $4.5 billion. “Small business” is for the most part defined as businesses having fewer than 500 employees and less than $5 million in income.   Business owners are required to put up a down payment of just 10 percent, compared with the 25 percent to 40 percent demanded in a commercial property loan.

Commercial real estate practitioners should know that the SBA option exists simply as part of diligence on behalf of clientele; and in financially trying times, it might even make the difference between deal or no deal.

Occupancy Requirements Mean One Size Does Not Fit All
The terms of these SBA 504 loans protect against default by providing approval requirements that owners are the primary occupier of their space.  Owners that occupy are more likely to pay back the loans, as opposed to investment properties where if a tenant leaves, the hunt for a new tenant creates pressure that elevates default to just another strategy available to the owner.

Further, the 504 program loans are made available through Certified Development Companies (CDCs), SBA’s community based partners for providing 504 Loans.

These requirements constitute a focus on long-term occupancy and community — promoting greater community stability.  The program highlights the difference between sustainable economic development and the kind of slash-and-burn approach to commercial real estate (and much else) that ended up being such poison to commercial property’s market for credit.
Full Details At SBA.Gov
The SBA 504 program details are all available at SBA’s website. 
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Why TV Might Not Be The Best Place To Learn About Data Center Property

It’s not exactly fair to say CNBC’s foremost investment guru Jim Cramer touches on commercial real estate very often.  As is usual with folks following equity markets on TV, publicly traded REITs come into his view only every now and then, he makes his pronouncements, slaps a button to make a sound effect and moves on to the next sector with nary a pause.

That said, nobody twists Mr. Cramer’s arm to give investment advice on TV.  So when he consistently gets a sector wrong, it’s worth noticing.  If it’s a hugely successful and growing commercial real estate market, all the more worth noticing. And Jim Cramer couldn’t get data centers more wrong than he has.

Over at DataCenterKnowledge.com, Rich Miller was the first to notice the wild misses in Cramer’s pessimistic prognostications about data centers.  The following chart says it all:

A chart showing Jim Cramer's mistakes in data center stock picking

Again, these are only stock picks and shouldn’t be treated as more than that.  But it does show that a very widely regarded analyst of all things financial has blown it when analyzing a key commercial real estate sector.  If he can, so can many others.

It wouldn’t be the first time. CRE is complex, highly local and intimately intertwined with many economic, regulatory and social factors.  Yet, here, Mr. Cramer is missing a very simple point about technology and floor space when he says “I think the data center industry is in decline. I see an industry that’s about to be brought low by new technology, so I think you should sell, sell, sell.”

With technology, it can be difficult to tell where limits are.   In our lifetimes, we have seen such massive changes, and such radical miniaturization of powerful business technologies, that we may simply guess that every physical need related to technology’s march will simply continue to shrink.  Apply that guess to data centers as a commercial property investment — in other words, believe that a new technology is coming that operates in thin air, without roofs or power or physical security —  and you might, as Cramer does, come up bullish.

But that guess couldn’t be more wrong.  The growth of the internet, the launch of every new service, of every new startup, means a directly heightened, not lowered, demand for data center capacity, and therefore for all the real estate features:  roofing,  power, physical security, etc.

Every story you see of, say,  user growth at Facebook or about the new record number hundreds-of-gazillions of Google searches translates into heightened demand for data center capacity.  Electronic commerce and telecommuting is displacing traditional commercial real estate buildout formulas, certainly, but that displacement must have a destination – and the consistently heightened demand for data centers is it.   Each of those individual users – the telecommuting worker, the online shopper, the social media maven –  have to connect to something somewhere when they wield their smart phones, pads or laptops.   That somewhere is a data center.

Obviously, picking stocks and picking a commercial property sector to patrol in your CRE career aren’t the same thing.  But let it be known data centers are the commercial square footage that drive every internet application.  They are affecting your market far beyond the primary cities — from Apple’s $1 billion data center investment in secondary-market Reno, NV to the surprising server farm projects that, well, are being built on farmland. 

Let the guy on TV do his thing.  We have to do ours.

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Agricultural Land Brokerage Course Announced By REALTORS® Land Institute

Education Program at Realtors Land InstituteAs part of its Land U program, REALTORS® Land Institute has announced its Agricultural Land Brokerage and Marketing Hybrid Course.  This is one agricultural hybrid not related to a crop: the no-travel course focuses at two subjects at once: land brokerage and land marketing.

Trillion Dollar Market

The agricultural investment land market is estimated at a trillion dollars.  This RLI course delivers the knowledge it takes to work this market, and more:

“To tap into this market, the land professional needs to know what market forces impact the value of agricultural land; the importance of soils and how they determine the highest and best use of the land; why land is an investment that attracts investors from around the world; how to analyze the income potential of agricultural land and estimate probable selling prices and costs; and how to market properties through online, print, electronic media, and RLI marketing sessions.  This course counts as an elective toward earning the Accredited Land Consultant (ALC) Designation. ”

How To Register

Once you’ve registered, all you need to take the course is a computer and a phone.  Check out the details of the RLI Agricultural Land Brokerage and Marketing Hybrid course at RLILand.com.

 

NAR Smart Growth Grants: Get Smart About Commercial Property In Your Community

NAR Database Growth 2007

Smart Growth is important stuff.  The commercial property market and the land use decisions that go with it loom very large in the balance of a community’s economic health.  Growth needs to be managed intelligently to maintain that balance, and that takes experts in commercial property engaging the community at large, shaping that balance among stakeholders.

The range of member benefits to REALTORS® now includes grants in support of Smart Growth efforts in your community.  Each year, the Smart Growth Action Grant Program makes available $120,000 to state and local REALTOR® associations to support engagement with communities toward effecting public policy intelligently.   How do you get started with Smart Growth?  Let’s first look at how it works in multifamily.

Smart Growth in Multifamily

If you’re in the multifamily market, download and read NAR’s White Paper on Short-Term Rental Housing Restrictions.  Commissioned by NAR and conducted by Robinson & Cole, LLP, this report discusses three often-used regulation techniques and provides commercial real estate practitioners with ways to counter them in the public policy discussion.  In addition, the report highlights “best practices” approaches to short-term rental housing that can guide engagement with local government.

Explore the Smart Growth Action Grants

Raising the profile of commercial REALTORS® in the conversation about land use is a main goal of NAR’s Smart Growth Action Grants. Members of state and local REALTORS® associations can take advantage of three levels of support, ranging from sponsorship of educational programs and speakers to seed funding that enables a local association’s initial efforts to guide their community’s Smart Growth, to support in-depth projects with multiple funding sources, including Charettes.

What’s a Charette?

Think of a Charette as a extended sit-down with all of the community stakeholders.  Property owners, commercial practitioners, government, volunteers, and others are invited to a multi-day collaborative process over the issues of land use.  As communities develop transit links, population evolutions and other social and economic effects, it makes sense to be the expert voice sounding the call for a huddle about these complex issues. A NAR Smart Growth grant can help make that process a reality in your market.

Commercial practitioners are invited to explore the full range of NAR Smart Growth Program resources, including toolkits for transit, infrastructure and schools.

Hanging Out The Shingle: Three Commercial Real Estate Startups

screenshot of the square foot.com
TheSquareFoot.com

Market upturns such as we’re experiencing bring a greater number of entrepreneurial projects – it’s the free enterprise system’s most reliable behavior and probably its greatest feature.  Without entrepreneurs, markets and wealth would concentrate into an ever-smaller segment and stagnation would follow, as discovery of new ways of adding value would be postponed forever.

Commercial real estate is no exception.  Practitioners, tech folks and others split off from brokerage or services firms to seek their own fortune, widening the marketplace and leveraging what and who they know — and why and when they know it.   The ways in which this takes place changes over time, even if the motivations don’t.  Let’s take a look at three such new arrivals to the commercial property marketplace.

The Square Foot: Full-Service SMB Leasing 

Retail, industrial and office space searching can be a pain for prospects and reps.  Common listings allow for search criteria that only tell part of the story and leave too much room for barking up the wrong tree.  But helping prospects to see themselves as tenants in a property at the time of search is a technical innovation at The Square Foot.  One thing that’s eye-catching and time-saving  in this application is the way it translates square footage into “room for x or more people”, and does so at search time by implementing a slider.  This allows the prospect to mouse her way toward an business expansion target expressed in headcount — something out on the horizon, yet informing the search right now.  Smart application design.

Dallas’s Ridge Pointe: Big-Firm and Fund Manager Team Up To Serve The Underserved

All the commercial real estate search innovation in the world isn’t going to add any value to a retail or office deal unless experienced pros are there to shape the deal and to read the area’s economic opportunity.  That’s the thinking behind the new Dallas brokerage Ridge Pointe Commercial Real Estate.  founded by former UCR broker David English and Jeff Grinnan of Magnim, Corp:

The company will focus on retail and office projects and clients in eastern communities, including Rockwall, Rowlett, Forney, Terrell, Mesquite, Garland, Sunnyvale, Greenville, and Royce City. “We think there is an opportunity for a full-service, community-based commercial real estate firm that focuses on areas underserved by other firms,” English said.

He and Grinnan are longtime friends who both live in the Rockwall area, which gives them “unfair advantage,” English said: “We intimately know the market and understand it because we live in it. We want to add value to the area and do things that are beneficial to the community.”

42 Floors: Meeting Startup Office Needs In Technology’s Cradle

The San Francisco / Silicon Valley commercial property market is the nation’s startup business showcase.  Venture capital firms are channeling billions into finding the next big tech hit, and the office market is always reflective of that attention.

42 Floors focuses on the needs of the Bay Area startup business, but doesn’t stop at the floor space.  Using a very contemporary and elegant site design, 42 Floors puts together map searching with the “Showroom” – the place where the startup’s need for everything from whiteboards to onsite haircuts is only a click away.  This joining of searching for both space and for stuff to put in it is similar in concept to Rofo.com, but implemented less as a social application  and more as a very intuitive walk through the possible.  This is one commercial RE app that’s ideally matched to the psychology and patterns of creating a startup.

 

United States Real Estate Market Ranked Most Transparent, Says Jones Lang LaSalle

Jones Lang LaSalle

As the global commercial property market evolves, it is marked by two kinds of growth. First, the sources of investment capital grow in number around the world. Then comes growth in the number of destinations for such capital. Buyers and investors in commercial real estate are increasingly international, so investments and returns have to make long trips to get where they’re going. When that’s true, the demand for clarity, predictability, reliable measurement and sustainability — known collectively in commercial real estate as transparency — becomes increasingly important.

The United States Provides Great Transparency In Commercial RE Deals

The 2012 Global Real Estate Transparency index released by real estate services firm Jones Lang LaSalle this week places the United States on the top of the list when it comes to transparency in real estate. The study looked at nearly 100 real estate markets worldwide and at nearly as many different factors:

Among key findings from the report:

  • The United States ranks as the world’s most transparent real estate market in 2012, followed by the United Kingdom and Australia. Also ranking as ‘Highly Transparent’ : Canada, Netherlands, New Zealand, France, Finland, Switzerland and Sweden.
  • The MIST growth markets (Mexico, Indonesia, South Korea and Turkey) are significantly improving in transparency, with Turkey leading the way.
  • Looking at regions, Latin America shows the strongest progress in transparency.
  • Environmental sustainability and energy efficiency  has emerged as an important transparency factor with the United Kingdom, Australia and France the most transparent markets in terms of real estate sustainability. The UK has a long history of building energy efficiency system and introduced the world’s first Green Building rating system.  Australia has been the test bed for new environmental laws, regulations and incentives.

What Is Transparency?

Transparency in commercial real estate is a complex set of public and private factors that interrelate to produce a positive environment for investment and economic growth.  One defining aspect of transparency is the publishing of data — by government, by lenders, by practitioners, by owners — so that key performance indicators are easily available in order to allow comparisons and benchmarking.  Transparency is both a count of the number of these indicators as well as their reliability.   Law and regulation in the US tends to produce more real estate market transparency in the net.

How Does Sustainability Relate To Transparency?

One example of a private indicator that adds to transparency is the set of various metrics illuminating the performance of a commercial property, right down to its energy efficiency.  How much energy per square foot a property uses in a month can make or break a decision to invest in that property today; energy markets are volatile and capital is making a very long trip these days.  Today, the energy profile of a property is no less important than its debt load, permitting/zoning, improvements history or other obviously critical indicators when evaluating potential investment.
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NAR Commercial’s Bill Armstrong And Bob Goldberg On The New NAR Commercial Member Benefits

 

NAR VP of Marketing Bob Goldberg

Today’s NAR Commercial podcast by NAR Treasurer Bill Armstrong is loaded with new developments and member benefits for NAR Commercial REALTORS®.  Bill sat down with NAR Commercial Senior Vice President of Marketing Bob Goldberg to run down the recent and exciting changes in the marketplace for commercial property listings, research, solutions and more.

Watch the entire video cast here.

Podcast highlights include:

  • Discussion of the competitive landscape shifts and recent commercial property information marketplace mergers, a background against which these new developments are taking place
  • Announcement of CommercialSearch.com, a major new public search benefit under development
  • The role of new NAR Commercial benefits partner Xceligent in providing better, faster and less expensive research and information solutions for commercial practitioners
  • The role of competition in delivering the highest quality, lowest-priced solutions and products for NAR Commercial members
  • The future of ePropertyData and CommercialSource.com along with NAR Commercial’s new offerings
If there’s one thing we can count on in commercial property, it’s change. Stay tuned right here at The Source blog and our Twitter account for the latest developments in this ever-evolving market.

Three Long-Term Looks At Commercial Real Estate

There’s no doubt we see many signs of recovery in the national commercial real estate market.  But as with any gigantic, inter-related collection of localities, sectors and instruments, it’s tough to know with any certainty what to expect long-term.  As always, there’s plenty of room for disagreement about what lies beyond the horizon. Here are three conflicting looks at the CRE market long-term:

The Good: At this month’s NREI’s Strategic Real Estate Investment Conference in New York, panelist Arthur Mirante, principal and tri-state president of Avison Young painted a sunny picture of commercial investment, noting its steady attractiveness when compared to stocks.  While he points out that knowing the market means mastering complexities, he believes that long-term, commercial real estate is the better value.

You can watch the full video interview with Mirante at NREI’s page.

The Bad: When a big bank issues a new CMBS — that is to say, when a bank gets into the selling of the mortgage debt of commercial properties, the length of term of these bonds helps to tell us how much risk the bond issuer thinks is present with the underlying commercial mortgages.  Shorter terms means a perception of higher risk.  And JP Morgan Chase’s latest CMBS issue includes fewer 10-year notes and more 7-year notes, meaning they are “bowing to duration risk”, or, finding less happiness in the long-term CRE picture than you or I might.

The Not-So-Ugly: Then again, if giant banks were any good at evaluating mortgage risks, high or low, the country wouldn’t be in the hole economically now, would it? Moving along from our pinstriped friends to more, well, expert persons on the subject, we find an interesting long-term view from Jeffrey I. Friedman, CEO of Associated Estates, a multifamily REIT with much midwestern apartment property in its portfolio.  Friedman’s long-term take “sees a lot of runway left” for apartments with a mixed forecast.  Most interestingly, he thinks it’s a misconception to see job growth as the driver for apartment demand.  Instead, he says, it’s family formation. Check out the whole interview with Friedman here.

What’s your long-term view on commercial property markets?

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Stay On Top Of Important Local And National Commercial Real Estate Legislation With Scout

One of the greatest things about our system of government is the amount of lawmaking done in public.  The texts of bills, and speeches on bills of all kinds is public information. When proposed laws come up, we have a chance to see what they are, where they came from, who they will benefit, who they will impact and why, and when the votes are coming.

But because of all the work involved, it’s still a only a slim chance.  Being allowed access to this information is merely the first step. For example, NAR Commercial’s efforts on Capitol Hill include this exhaustive work of staying on top of the congressional record, watching carefully for issues that relate to commercial real estate when they arise, tracking their progress through the chambers and replicating all of this for all 50 states in addition to DC.

Before action comes alert, filtering, progress monitoring.  So when a free software tool comes along to allow individuals to help out with the legwork needed before action, you bet we’re going to talk about it.

The Sunlight Foundation is a non-partisan, non-profit based in DC dedicated to making government transparent and accountable.  They’ve rolled out Scout, which is an awesome new tool that alerts you when Congress or your state house proposes legislation that affects you or your commercial real estate clients.  You set up keywords such as “retail” or “commercial real estate” or “property tax” and the site will alert you when these terms appear in pending legislation — including in your state house!

Scout’s uses for commercial real estate pros are many.  All real estate is local, and so is all state legislation. Since Scout works with state houses and not just DC, there are numerous opportunities to use it to directly add value to your relationships.  Early warning about legislation coming down the pike in the state house about road construction in a given area can be a great subject of discussion between you and your retail clientele.  Bills proposing anything touching financial issues probably matter to your clients – Scout lets you be the one to bring them up.

Similarly, when Congress in DC kicks around changes in REIT accounting, it can help those of you in the investment side know what’s coming tax-wise and adjust accordingly.

Check out Scout. Watch the short tutorial video below and share with us what you find.  Help us keep government working for you.

 

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