Blog Posts

Home  /  Blog Posts

Tech-Driven Demand is Pushing the U.S. Industrial Sector to New Heights

by Kelli Thompson December 22, 2017
Sponsored by Ten-X By Peter Muoio, Ph.D. Rapid shifts in how people and companies are using technology is creating winners and losers across various sectors of real estate. Consumers are increasingly purchasing goods online, and a steady drumbeat of news continues to inform us about the latest brick-and-mortar store closures and the bankruptcies of once fabled retail brands. More companies are also housing their computer servers off-site, which has reduced the office space requirements of many firms. These headwinds have presented significant challenges for the retail and office sectors. In contrast, the industrial sector has reaped the benefits of these changes in the form of unprecedented demand for distribution and warehouse space and data centers. According to our recent Industrial Market Outlook, robust absorption has pushed vacancies in the industrial sector down to just 7.6 percent nationally, their lowest levels since 2000. Vacancies should bottom out in the mid-7 percent range in coming years. While absorption is projected to turn negative in the event of a cyclical downturn, we expect vacancies to rise into just the mid-9 percent range by 2020, still well below the high levels of previous downturns. Industrial rents have risen steadily—over 2 percent annually in recent years—bringing rent levels to a historic peak. Our forecasts show […] readmore

The Best Practices in Property Management are Undergoing an Evolution

by Michael Lanning October 27, 2017
When was the last time you used a typewriter? How about a home movie camera or dial phone? These are a few examples of technologies that have become obsolete due to newer innovations. So it is with best practices. According to the Merriam-Webster Dictionary (online of course, because when was the last time you used a printed dictionary?) a “best practice” is: “a procedure that has been shown by research and experience to produce optimal results and that is established or proposed as a standard suitable for widespread adoption.” The keywords there are “experience” and “optimal results.” We work in an industry in the midst of dramatic demographic, technological and cultural change that scream for innovation and the use of new tools to address a new set of needs for a changing tenant and client base. Therefore, what we define as best practices must also change. As an example, in 1947, IREM’s textbook, “Principles of Real Estate Management,” suggested four ways of marketing a property: Newspapers, radio, outdoor signs and direct mail. Imagine if we as an association still offered only these modes of communication as best practices? By comparison, the 2017 edition modifies that list to include website and social media and other electronic marketing means—new tools for a […] readmore

Wynn's New Vegas Resort to Feature Bumper Cars and Fake Cops

by Bloomberg October 27, 2017
(Bloomberg)—Casino magnate Steve Wynn gave new details about the $1.6 billion resort he is building in Las Vegas, including interactive rides and attractions designed to wow non-gamblers. Paradise Park, as the project is called, will feature LED-lit bumper cars that make crashing sounds and are chased around an oval by fake police officers. Participants who finish the course first will get prizes, Wynn said on an earnings call with investors Thursday. Other attractions will include zip lines, fireworks and a carousel that stretches out over the man-made lake. Guests will be able to pay to ride in parades. The floats, which also will travel over water, will include giant spiders and King Kong. “It’s not the Rose Bowl parade,” the 75-year-old billionaire said. “It’s a much edgier kind of thing.” Non-gambling attractions are a big source of growth for Las Vegas. Wynn Resorts on Thursday posted its best third quarter ever in the city, thanks in part to shows, shopping and other outside-of-the-casino revenue sources, Wynn said. Wynn first announced the new resort last year. It will be built on the site of a golf course the company owns. The course will close in December, with construction of Paradise Park slated to begin Jan. 3. The property, which is located […] readmore

By How Much Should You Raise the Rents at Your Apartment Building?

by Bendix Anderson October 24, 2017
Another great article by Bendix Anderson of National Real Estate Investor magazine… How high can landlords raise the rents at their apartment properties before they begin to lose tenants? In the current market, many markets have very few apartment vacancies, and face little competition. That would usually be a sign to raise rents. But many renters have already been pushed to the limit financially. Another rent hike could force them to move in with roommates or their families—or simply to miss the next rent payment. “A growing number of renters are spending less on non-essentials to make up for increasing rents,” says a spokesperson for the government agency Freddie Mac. Fortunately, the data shows some clear patterns that can help landlords and property managers decide when—and by how much—to raise their rents. More renters resist rent hikes and luxury renters have lots of choices As rents rose sharply in recent years, more renters are looking for other options. “A growing number of renters are planning to move because of changes in rent,” says the Freddie Mac spokesperson. That percentage has jumped to 44 percent in March 2017, up from 34 percent the year before, according to a preview of Freddie Mac’s soon-to-be-released 2017 Renter Survey. Managers of class-A apartment complexes can […] readmore

HNW Investors Love Student Housing, Though Attractive Deals Are Getting Harder to Find

by John Egan October 5, 2017
When it comes to real estate investments, high-net-worth (HNW) individuals and family offices have been going to school: in recent years, more of them have been adding student housing to their portfolios. However, some observers say that the interest of HNW investors and family offices in student housing is tapering off as other investors elbow their way into this asset class. Private investors, including HNW investors and family offices, accounted for the largest transaction volume in U.S. student housing from 2010 to 2016, says Jaclyn Fitts, director of student housing at commercial real estate services company CBRE. From 2014 to 2016 alone, the dollar volume of transactions in the sector shot up from $3.0 billion to $9.8 billion, says Fitts, citing CBRE’s internal tracking data. CBRE predicts this year’s volume will be about the same as last year’s. So far in 2017, private investors represent a sizable share—by some accounts, 35 percent to 45 percent—of transaction volume in student housing. However, Fitts says, the percentage is declining as more institutional and international investors target this asset class. Al Rabil, managing partner and CEO of Kayne Anderson Real Estate Advisors, says that as student housing has attracted more institutional capital during its maturation from an alternative asset class to a traditional […] readmore

Investors Look for Bargains in Undervalued Markets

by Beth Mattson-Teig October 4, 2017
Property values have surged steadily higher in the prolonged recovery. But that high tide isn’t raising all boats as some metros are still falling short of 2007 pricing. The broader commercial real estate market has regained and surpassed values that existed at the prior peak. The major metros have seen the biggest bounce with values that are 52.5 percent higher than a decade ago, while the rebound has been more modest in non-major metros at 10.8 percent, according to the CPPI produced by Real Capital Analytics (RCA), a New York City-based research firm. “There are certain markets that are still nowhere near that previous peak,” says Jim Costello, senior vice president at RCA. The firm’s researchers estimate there are still more than a dozen markets where property values are below 2007 levels. Las Vegas tops the list of laggards with average values across property types that, as of July, are 34.3 percent lower than they were 10 years prior. Other metros still battling a steep decline include Orlando, Fla. at 24.9 percent; Sacramento, Calif. at 24.4 percent; Fort Myers/Sarasota/Naples, Fla. at 21.8 percent and Phoenix at 18.4 percent. Metros where values were driven by the housing boom, such as Las Vegas, Phoenix and parts of Florida, are still feeling the […] readmore

Prices Rise for Apartment Buildings, But Fewer Properties Sell

by Bendix Anderson October 3, 2017
Investors continue to buy fewer apartment properties than they did last year. Yet prices continue to rise. “It’s another down month for volume, but prices are still increasing,” says James Costello, senior vice president for Real Capital Analytics (RCA), a New York City-based research firm. Usually prices fall when transaction activity slows down. But strong rent growth and relatively healthy occupancy rates in the apartment sector continue to attract investors, who are then frustrated by the relatively small number and high asking prices of apartment properties available for sale. “The last three months have been the same story—it has been another month of disconnect between rising prices and falling deal volume,” says Costello. Property markets cool off Investors bought and sold $11.7 billion in apartment properties in August 2017, down 8 percent from the dollar volume spent on apartment properties in August 2016, according to RCA. August would have been even less busy if it were not for a few giant portfolio deals. The dollar volume of single apartment properties sold dropped 18 percent during the month compared to the year before, according to RCA. Usually, investors start a new year slowly. So far in 2017, the usual declines have been steeper than normal. Experts say fewer properties are available […] readmore

The 10 Highest Paid REIT CEOs

by Mary Diduch September 8, 2017
S&P Global Market Intelligence provided compensation information for the chief executives of U.S.-based public REITs from 2014 to 2016. Just how much do the heads of top U.S. REITs make? S&P Global Market Intelligence, a New York-based research firm, provided compensation information for the chief executives of public REITs in the U.S. from 2014 to 2016. All of the CEOs on this top-10 list received at least $11 million—with two receiving over the $15 million mark—in total compensation for the fiscal year 2016. Half of the executives made less than the year before. The figures reflect the data S&P had as of September 2017. The firm did not find compensation information for some REIT CEOs. readmore

Are Investors Ready to Return to Non-Listed REITs?

by Beth Mattson-Teig June 7, 2017
Are Investors Ready to Return to Non-Listed REITs?
The non-listed REIT industry has seen capital flows drop off a cliff in the past several years. But recent data shows that the market may have hit bottom and is ready for a rebound. Investor capital flowing into non-listed or non-traded REITs has been plummeting since hitting a high of $19.6 billion in 2013, according to Robert A. Stanger & Co. Inc. In 2016, sales dropped to $4.5 billion. Early data for 2017 indicates that the market may be down, but not out. Year-to-date sales through April are about equal to the same period in 2016 at $1.85 billion for non-listed REITs. Some see the industry at a critical inflection point. Sales have suffered, largely due to changes and uncertainty in the regulatory environment. At the same time, the industry is in the midst of an evolution, with changing products and an expanding sales network aimed at recapturing its lost momentum. “The regulatory environment has paralyzed our industry. With so much uncertainty it was easier and more prudent to take a step back and wait for some clarity before moving forward,” says Anthony Chereso, CEO of the Investment Program Association (IPA). IPA is an advocate for the portfolio diversifying investments industry, which supports individual investor access to a variety of […] readmore

Who Are the Most Likely Tenants to Backfill Empty Retail Big Boxes?

by Diana Bell June 7, 2017
As the retail industry continues with its metamorphosis, talk has turned to what will happen with all that extra big-box and mall anchor space that’s coming on the market? From 36 to 37 million sq. ft. of retail space could be returned to the market by next year, according to a recent report by JLL Research, based on store closure announcements. The next occupiers of the vacated spaces run the gamut, sources say, from specialty retailers to service providers to entertainment concepts to industrial and office tenants. “Retail real estate is undergoing an entrepreneurial moment like never before. It’s a blank slate and there’s no cookie cutter,” says Jedd Nero, executive managing director of retail services at commercial real estate services firm Avison Young. But because this is a new phase in the retail real estate sector, the effect on rent rolls and ROI of these new strategies is difficult to predict, he notes. There’s “no crystal ball on how long this metamorphosis will take, and no timeframe that has to be met,” Nero says. Some anchor space is getting repurposed as charter schools, community colleges and call centers, according to Edward Dittmer, of Morningstar. The benefit to incorporating a non-retail use is that it brings people in during the […] readmore