Browse Category: Research

Self-Storage For Sale: Browse Nearly 250 Self-Storage Listings Nationally

Photo of self-storage facility hallway

After reading IRR’s latest report on the national self-storage property marketplace, I was inspired to take a closer look at this dynamic sub-sector. A wealth of commentary and metrics, the 2017 National Viewpoint National Self-Storage Report lifts the veil on this specialty sub-sector’s comeback from the 2008 recession and suggests where the market is headed based on past performance.

The fundamentals of the market are solid, says report author Steven J. Johnson, MAI, Senior Managing Director at IRR-Metro L.A.  Coming off of a hot year in 2016, the national marketplace in self-storage saw two huge portfolio deals completing, totaling over $3 billion alone. This in a wider market that sports some interesting drivers and leading indicators:

Only 15% of self-storage held by REITs

Quoting the report as calling the national market “fragmented” and dominated by small groups or mom-and-pop operations, it surprised me to see that institutional investors have thus far left 85% of the self-storage pie on the table. From where I’m sitting, that suggests that, all things being equal, acquisition volume in is likely to rise in 2017. Adding to the heat: cap rates on average are landing between 6 and 6.25% across all class types.

Customer life events drive the self-storage business

Classic drivers of the self-storage industry include marriages and divorces.  There were approximately 2.2 million marriages and 800K+ divorces in the US in 2016.  This shows basically flat to declining national trends, both trailing downward slightly, which might appear to go against the case for market growth, but remember that buried in these numbers are cohabitation events displacing some marriages.  Other important life events include births,

See for yourself: browse Self Storage national property listings right now at CommercialSearch.com

Check out the live national picture in self-storage property right now —  click over to this live self-storage property query at CommercialSearch.com. The current listings count reads nearly 250 properties, located all across the US in primary, secondary and tertiary markets. The range of locations and classes tell the tale: this is an investment property class that has hung out its shingle and is doing business.

(Photo credit: Wikipedia)

CommercialSearch And RPR Commercial Features: Together At Last, For REALTORS®

Logos of CommercialSearch and RPR

Transformational providers of commercial real estate data don’t often find ways to interoperate, but when they do, the user benefits pile up fast.  Starting tomorrow, a notable new integration arrives: REALTOR® users of CommercialSearch’s national marketplace in commercial real estate data will have one-click access to powerful new features driven by RPR Commercial, including tax information, transaction history, and more.  From RPR:

As of March 16, 2017, REALTORS® with CommercialSearch who hold RPR accounts can easily jump from a listing within CommercialSearch into RPR’s extensive commercial property and trade area data, investment analysis tools, business intel, and comprehensive reports.

“RPR’s mission is to serve the needs of our 1.2 million REALTORS®,” said Emily Line, RPR vice president of commercial services. “Through partnerships like the RPR / CommercialSearch integration, we are able to expand our service offerings and to ultimately save our members time and money previously spent on multiple applications and subscriptions.”

The integration offers REALTORS® on CommercialSearch one-click access to RPR data found on both the website and RPR Mobile™. Subscribers will find property and owner facts, mortgage and tax info, transaction history, maps and photos. Visual heat maps can be drawn down to the census block group level with 25+ variables including traffic counts and more than 20 million business points of interest. And RPR Commercial reports––which can be sent by way of email or text–– reveal data on consumer segmentation, population, age, marital status, economic conditions, and education comparisons, among other datasets.

David O’Rell, managing director of CommercialSearch, believes the partnership furthers Xceligent’s commitment to providing an open technology platform that combines researched content with leading workflow tools.

“We are excited to partner with Realtors Property Resource®,” said David. “We will now be able to provide RPR account holders an exclusive opportunity to analyze local dynamics surrounding properties actively listed for lease or sale in the CommercialSearch national marketplace.“

About RPR® Commercial

Realtors Property Resource® (RPR®) is a wholly owned subsidiary of the NATIONAL ASSOCIATION OF REALTORS®. RPR Commercial provides REALTORS® with persuasive, decision-making data and reports for all types of clients. From identifying site selection using data sets such as public records, traffic counts, business points of interest, demographic and psychographic insights, and consumer spending data, to presenting reports that accurately depict current market activity as well as future projections, this valuable members-only benefit truly helps to validate a practitioner’s expertise.

About Xceligent™

Xceligent™ is a leading provider of verified commercial real estate information across the United States. Xceligent’s professional research team pro-actively collects: a comprehensive inventory of commercial properties, buildings available for lease and sale, tenant information, sales comparables, historical trends on lease rates and building occupancy, market analytics, and demographics. This information assists real estate professionals, appraisers, owners, investors, and developers that make strategic decisions to lease, sell, and develop commercial properties. Xceligent™, backed by dmg information, has launched an aggressive national expansion that will provide researched information in the 100 largest United States markets. Visit Xceligent.

Construction Spending Down in January: Census

US Construction Spending Down, Nonresidential Construction Slightly Higher

US Census data indicates a drop in total construction spending for the month of January 2017.  A 1% fall from the figure for the preceding December nonetheless represents an increase of 3% as compared to the preceding January of 2016.

Also hidden in the downtick was a year-over-year rise in nonresidential construction. That figure rose 1.5% year-over-year even as January compared to December showed a 1.9% drop.

Are Massive Gains In New Office Construction Over?

Annual census data showed an eye-popping annual increase in new office projects of 28.8% annually, which was the largest increase for any type of property tracked.  Looking solely at office construction from December-January shows a fall of 1.7%, suggesting either a reversal of a trend or an end-of-year slowdown in the sector generally.

How Can I Get US Census Data On Construction?

The US Census releases data on construction regularly and can be found at Census.gov. Construction spending numbers are sourced from the Census’s VIP Survey, aka the Value Of Construction Put In Place survey, which provides monthly estimates of the total value of construction work in the US. Included in the survey are estimates of architectural and engineering work, labor, materials, taxes, interests and overhead costs.

 

If Trump Targets Dodd-Frank, What Are the Commercial Real Estate Impacts?

While we find ourselves in the early, frenetic days of the Trump administration, it’s far from clear exactly what to expect from a White House that has single-mindedly pursued its own private list of policies without much concern for fallout or for some campaign promises. In what appears to be a intentional pattern of confusion, some of the President’s campaign promises have been confusingly dropped by the Oval Office, only to picked back up within hours. The very latest example of this pattern over the past 24 hours being his pledge to negotiate with the pharma industry to achieve lower drug prices.  This was a promise apparently dropped only to be picked back up hours later the same day.

So when the President announced yesterday that he intended to “do a big number” on the Wall Street reform package called Dodd-Frank, we got a warning something might (or might not) happen to key regulations on risk retention that deeply affect the commercial real estate industry.

Regulation, Risk and Reminders

President Trump severely criticized the Dodd-Frank law yesterday, calling it a “disaster” and promising to “do a big number” on the law soon. If the President does actually follow through with gutting Dodd-Frank, what could change for commercial real estate?  Whatever changes that stick will affect at least one of these areas:

  • The Credit Risk Retention Rule – Forces issuers of bonds comprised of performing commercial real estate properties to hold a percentage of the offering.  Affects CMBS marketplace significantly, as written about here.
  • Credit Rating Agency Reform – Rules that prevent the complicity of risk ratings agencies (Moody’s, Fitch, S&P) in mislabeling bond offerings to obscure systemic risk.  Affects CMBS and REIT share markets as well as the wider debt market transparency.
  • Legislative proposals to wind down the Government Sponsored Entities such as Freddie Mac that originate a great deal of capital for apartment building projects
  • The Volker Rule – Prevents banks from engaging in trading in certain kinds of investments. Affects: proprietary trading, disallows banks from owning or investing in hedge funds or private equity funds. If struck down, may increase availability of capital from banks to exotic or alternative financing vehicles serving the CRE industry.

Unclear (Still)

Guessing at impact is tough, because Dodd-Frank rules are a moving target — rules are still being designed and implemented with a time schedule that reaches into 2019 and beyond.  While the President signed an executive order this week compelling the elimination of two regulations for every one invoked, a move that tends to support speculation that the President sees regulations as intrinsically bad things, nobody should claim to know exactly what’s on the Donald’s mind before a) he announces it himself  and b) we wait a little bit for the dust to settle.

Sessions Points To Congress On Legal Marijuana

During his confirmation hearing yesterday on Capitol Hill, prospective US Attorney General Jeff Sessions sent an ambiguous message to the real estate developers, property owners and lenders working to expand legal marijuana business in states that allow it. Pressed by Sen. Patrick Leahy (D-VT) on the topic of enforcement of federal law prohibiting marijuana in those states, Sessions responded with a bit of safe boilerplate before pointing to Congress:

“Using good judgment on how to handle these cases will be a responsibility of mine. I know it won’t be an easy decision but I will try to do my duty in a fair and just way.” 

He added: “One obvious concern is the United States Congress has made the possession in every state and distribution an illegal act. If that’s something that’s not desired any longer Congress should pass a law to change the rule. It is not the Attorney General’s job to decide what laws to enforce.”

Banks, developers, investors looking for guidance on legal marijuana

The commercial real estate implications of Sessions’ dodge are significant. A growing legal marijuana industry and the real estate professionals that serve it await clear leadership on the issue as sales figures are jumping by double digits in year-over-year measures. The hunt has been on for property and legal stability for dispensary developers in a growing number of states that have adopted legalization measures, from the 28 states that have legalized medical marijuana to the eleven now legalizing recreational use. Traditional capital sources such as banks have been shy to lend and serve the industry under conditions that leave open the possibility of federal action closing the enterprises due to cannabis remaining illegal at the federal level.

As the business of legal marijuana waits for clarity from Washington, it appears the wait will go on.

States that have legalized weed

As of November 2016’s election, these seven states plus the District of Columbia have legalized marijuana for recreational use:

Alaska, California, Colorado, Massachusetts, Nevada, Oregon, Washington, Washington D.C.

And these states have some form of legalized medical marijuana:

Arizona, Alabama, Arkansas, Connecticut, Deleware, Florida, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maine, Missisippi, Missouri, Maryland, Michigan, Minnesota, Montana, New Hampshire, North Carolina, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Wisconsin, Wyoming.

Build Better L.A.: Los Angeles Votes In New Requirements For Developers, Affordable Housing

Los Angeles is the second largest city in the ...

A significant initiative with commercial real estate effects was passed on last week’s ballot in Los Angeles. Expected to take effect this month, the measure changes, almost overnight, the labor and affordable housing requirements for developers building in the city, affecting multifamily projects with ten or more units, as well as other projects.

Measure JJJ, also known as the Build Better L.A. initiative, was sent to the voters in the general election of Nov. 8.  In Los Angeles City, JJJ passed with 64% of the vote at over 461,000 votes and according to JDSupra law blog, takes effect within ten days of the certification of vote results, or, on November 19, 2016.

Affecting projects that ask for a zoning exemption, a plan amendment, a height change or a authorization of residential use of land where previously not permitted, JJJ requires developers of projects with ten residential units or above to provide a percentage of affordable housing units on-site. Depending on the exemption sought, the percentage will fall between 5% and 40% affordable units.

Some alternatives to compliance are available.  Per JDSupra:

[T]he Initiative offers alternatives to compliance, including providing affordable housing units off-site, acquisition of “at-risk” affordable housing properties and converting the units into non-profit or other similar type of housing, or payment of an in‑lieu fee into the City’s new Affordable Housing Trust Fund. The in-lieu fee will be determined by a formula using an “Affordability Gap” multiplier as defined in the Initiative.  Additionally, projects that opt to provide off-site housing will be required to provide additional affordable units based on a formula that increases the number of required units based on the distance from the primary project.

Further, the Initiative requires that residential housing projects seeking discretionary approval be constructed by licensed contractors, with good faith effort to ensure that 30% of whom are permanent Los Angeles residents and at least 10% of whom are “transitional workers”—single parents, veterans, on public assistance, or chronically unemployed—whose primary place of residence is within a 5‑mile radius of the project.  Projects subject to the Initiative will be required to pay “prevailing wage”—an average of area wages based on a formula created by the state government—to all construction workers on the project.

(Photo credit: Wikipedia)

Boo Diligence: Evaluating The Halloween Industry

With over 4,000 haunted houses and horror attractions running across the United States, chances are there’s one serving your scarea. Ever wonder what goes into site selection for these specialty properties? Plenty of boo diligence.

The holiday’s economic impact is spooktacular: according to the National Retail Federation, Americans spent over $8 billion on Halloween in 2012. October brings not only p-eek foot traffic for haunted attractions, but also a wave of retail pop-ups to sell costumes and party supplies. Chopping center managers know: these seasonal pop-ups can produce a distinct upward pressure on NOI (net op-boo-rating income) for the fourth quarter balance sheet.

And why not?  Vacant commercial space screams out for an inexpensive solution, one without capit-owl expenditure. Landlords can cash in on the holiday, but must be careful to not leave themselves exposed on costs for CAM (cauldron area maintenance), especially for properties financed with steep groan-to-value terms or that that depend on high IRR, (interment rate of return). As always, sound business principles should win over witchful thinking.

List of haunted commercial sites

The haunting industry — yes, it’s actually called that — appears to have a nerve center online called Hauntworld.com.  There you can find a North American directory of haunted house operations, suitable for a quick dip of real estate market research as we find ourselves in the trick-or-REIT season. Use it to spot an opportunity: maybe you can put some of your vacant invent-eerie to work next year.

2,200 Year Old Lease Literally Written In Stone

Stone tablet containing 2,200 year old lease agreement

2,000 years ago on the western coast of Turkey, the ancient Greek city of Teos stood. A Mediterranean port and center for regional commerce, Teos’s two harbors brought people and goods throughout the Anatolian region of modern Turkey. The commerce brought with it law and paperwork, although a great deal of the “paper” twenty centuries ago was actually stone.  Teos is today an archaeological goldmine thanks to so many written — or chiseled — words.  Discovered this year: a 1.5 meter-long inscribed stone tablet containing a detailed 58-line commercial lease complete with a few disturbing clauses. From the Ars Technica piece on the discovery:

Carved into a 1.5 meter-long marble stele, the document goes into great detail about the property and its amenities. We learn that it’s a tract of land that was given to the Neos, a group of men aged 20-30 associated with the city’s gymnasium. In ancient Greece, a gymnasium wasn’t just a place for exercise and public games—it was a combination of university and professional training school for well-off citizens. Neos were newbie citizens who often had internship-like jobs in city administration or politics. The land described in the lease was given to the Neos by a wealthy citizen of Teos, in a gift that was likely half-generosity, half-tax writeoff. Because the land contained a shrine, it was classified as a “holy” place that couldn’t be taxed. Along with the land, the donor gave the Neos all the property on it, including several slaves.

Use Of Premises Clauses

Beyond enshrining the brutal custom of slavery, the lease agreement also describes a tax-deductible donation of property and numerous clauses concerning punishments if the property was misused.  From the Hurriyet Daily News:

In order to meet the expenses of this land and to get income, the Neos rented the land. The inscription tells us who owned the land in the past and what it includes. It also mentions a holy altar. The Neos express in the agreement that they want to use this holy place three days a year. In this period, the state collected tax from lands. But since the land was defined ‘holy,’ it was exempted from tax. It is understood that the land was rented at an auction and the name of the renter is written on the inscription,” [Archeology professor Mustafa] Adak said.

[…]

Almost half of the inscription is filled with punishment forms. If the renter gives damage to the land, does not pay the annual rent or does not repair the buildings, he will be punished. The [property-owning] Neos also vow to inspect the land every year,” said the Akdeniz University professor. 
 “There are two particularly interesting legal terms used in the inscription, which large dictionaries have not up to now included. Ancient writers and legal documents should be examined in order to understand these words mean,” Adak said.

As I’ve written here before, the ancient world’s commercial property business was a fascinating and sometimes depressing thing. So the next time you’re convinced the commercial lease on your desk is difficult to understand as well as being hard to break, think of  the landlords of Teos, their human property and their stone lease.  Today’s tenant has it relatively easy under that comparison.

Photo credit: Ars Technica

 

Parking Ratios: The Next Great Correction?

English: Photo of parking spaces in an America...

Determining the parking ratio for a commercial property project isn’t complex arithmetic. The number of parking spaces per 1,000 square feet of gross rentable space is the parking ratio. Sometimes a property’s type calls for a minimum number of spaces, sometimes local zoning regulations call for a minimum.  But these minimums are getting a second look in the near future as driving becomes less popular and cities stress walkable development.

A University of California study on parking in 2011 found that the US sports over 800 million parking spaces, taking up 25,000 square miles of land, or about the equivalent of the entire land area of West Virginia — or four New Jerseys.

With a commitment like that, it’s a fact that a huge amount of value is locked up in parking lots.  And now, cities across the US and the world are rethinking the level of commitment to parking.

The Guardian’s recent piece “Lots to lose: how cities around the world are eliminating car parks” takes a drive around the issue, looking for a future less committed to yellow painted lines on asphalt and more committed to green — both the sustainable and the folding kind.

As cities across the world begin to prioritise walkable urban development and the type of city living that does not require a car for every trip, city officials are beginning to move away from blanket policies of providing abundant parking. Many are adjusting zoning rules that require certain minimum amounts of parking for specific types of development. Others are tweaking prices to discourage driving as a default when other options are available. Some are even actively preventing new parking spaces from being built.

[…]

To better understand how much parking they have and how much they can afford to lose, transportation officials in San Francisco in 2010 released the results of what’s believed to be the first citywide census of parking spaces. They counted every publicly accessible parking space in the city, including lots, garages, and free and metered street parking. They found that the city had441,541 spaces, and more than half of them are free, on-street spaces.

Knowing the parking inventory has made it easier for the city to pursue public space improvements such as adding bike lanes or parklets, using the data to quell inevitable neighbourhood concerns about parking loss. “We can show that removing 20 spaces can just equate to removing 0.1% of the parking spaces within walking distance of a location,” says Steph Nelson of the SFMTA.

The data helps planners to understand when new developments actually need to provide parking spaces and when the available inventory is sufficient. More often, the data shows that the city can’t build its way out of a parking shortage – whether it’s perceived or real – and that the answers lie in alternative transportation options.

 

Getting Demand Right

Using dynamic pricing, San Francisco managed to reduce the demand for parking by nearly half.  But sometimes demand falls without changing pricing, as in Philadelphia:

Since 1990, the city of Philadelphia has conducted an inventory of parking every five years in the downtown Center City neighbourhood, counting publicly accessible parking spaces and analysing occupancy rates in facilities with 30 or more spaces. Because of plentiful transit options, a walkable environment and a high downtown residential population, Philadelphia is finding that it needs less parking. Between 2010 and 2015, the amount of off-street parking around downtown shrank by about 3,000 spaces, a 7% reduction. Most of that is tied to the replacement of surface lots with new development, according to Mason Austin, a planner at the Philadelphia City Planning Commission and co-author of the most recent parking inventory.

What becomes plain as more cities line up to improve infrastructure and walkability, or use technology to re-jigger pricing as demand fluctuates: parking as we’ve known it — and priced it — is nearing the end of its era. Fixed minimums or quotas may lag behind the new reality, but developers and property owners will need to stay vigilant as old, reliable parking ratios no longer find space in reality.

(Photo credit: Wikipedia)

 

 

Cornstalks In The Big Box? Target To Add In-Store Vertical Farms

English: Logo of Target, US-based retail chain

Major metropolitan areas are making an effort to distance themselves from the traditional food supply chain. Cities, dreaming of achieving food independence from the farms that surround them, are increasingly turning to vertical farming projects that grow food in urban settings.  Thanks to giant advances in green engineering and sustainable agricultural technologies, these vertical farms are gaining industrial scale efficiency.

Marking this progress is news that Target stores will debut vertical farms inside some of their stores this spring.  According to Business Insider, the big box retailer will add vertical farms to some of its stores this spring.  Customers will be able to pick their own leafy greens — or have store staff take on the task. From the piece in Business Insider:

In January, Target launched the Food + Future CoLab, a collaboration with design firm Ideo and the MIT Media Lab. One area of the team’s research focuses on vertical farming, and Greg Shewmaker, one of Target’s entrepreneurs-in-residence at the CoLab, says they are planning to test the technology in a few Target stores to see how involved customers actually want to be with their food.

“The idea is that by next spring, we’ll have in-store growing environments,” he says.

During the in-store trials, people could potentially harvest their own produce from the vertical farms, or just watch as staff members pick greens and veggies to stock on the shelves.

Most vertical farms grow leafy greens, but the CoLab researchers are trying to figure out how to cultivate other crops as well.

“Because it’s MIT, they have access to some of these seed banks around the world,” Shewmaker says, “so we’re playing with ancient varietals of different things, like tomatoes that haven’t been grown in over a century, different kinds of peppers, things like that, just to see if it’s possible.”

Space And Indoor Agriculture

Does your property portfolio include a potential vertical farm? For ideas on vertical farming space configurations, these concept videos from architects help to visualize indoor farming on a profitable scale. To overcome the big spread between cost of land in urban vs. rural areas, most vertical farming has to emphasize the vertical and get more yield per ground square foot than traditional dirt.  In the case of a big box or supermarket devoting a portion of its footprint to vertical farming, that requirement might not apply, suggesting there’s a market developing for modular indoor farming operations that insert smoothly into traditional food retailing floor plans.  If you’re aware of developments in this area, leave a comment and let’s both keep an eye on this technology.