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The Top Secondary MSAs for CRE Investment

October 13, 2020 By

Which metro areas have performed best during the coronavirus pandemic?

COVID-19 has had a substantial impact on commercial real estate in top-tier metropolitan areas — particularly the gateway markets, many of which were forced to completely shut down businesses in an effort to control the pandemic. Most secondary markets suffered the same fate, but according to a recent report by data firm Trepp LLC, some fared better than others.

Trepp analyzed the performance of 21 secondary MSAs and created a list of the top 10 areas based on their commercial real estate investment potential. Here are the top five:

1.  Austin-Round Rock, Texas. Austin ranked first due to a high rate of population growth, a low unemployment rate, a strong influx of high-tech and warehousing jobs and an increase in new CMBS issuance.

2.  San Jose-Sunnyvale-Santa Clara, California. San Jose has strong employment and population growth, low CMBS delinquency rates and a high average occupancy rate.

3.  Denver-Aurora-Lakewood, Colorado. Denver saw the largest growth in the total outstanding CMBS balance as well as a low delinquency rate and limited exposure for retail and lodging loans.

4.  San Antonio-New Braunfels Texas. The MSA has had strong population growth and a minimal increase in its unemployment rate. The CMBS delinquency rate is low even though retail accounts for the largest balance.

5.  Sacramento-Roseville-Arden-Arcade, California. The MSA ranks relatively high due to its average occupancy rate and low CMBS delinquency rate.

Wondering which MSAs didn’t perform as well? The lowest-ranking secondary metros were Cleveland-Elyria, Ohio and Minneapolis-St. Paul-Bloomington, Minn.-Wisc. Both MSAs had high delinquency and unemployment rates.

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Working Together as a Team: Negotiating with Commercial Tenants During COVID-19

September 24, 2020 By

The COVID-19 pandemic caused widespread mandatory closures of all types of commercial properties. These closures, along with reduced consumer spending, have hampered business operations and created challenges for many businesses that lease office and industrial properties – some of which have asked their landlords for assistance in the form of rent abatements or deferrals.

Landlords facing this issue should refer to a research brief issued by the NAIOP Research Foundation that identifies best practices for triaging office and industrial tenant requests, offering reasonable accommodations to those tenants who need short-term assistance and responding to affected tenants.

Based on input from brokers and building owners as well as NAIOP data, the brief identified these common practices:

  • Rent relief. Building owners are generally willing to offer tenants reasonable rent relief to help them weather short-term disruptions due to COVID-19. The most common practice is to offer tenants a few months of deferred – not forgiven – rent that can be repaid over the remainder of the lease. Some landlords also agree to rent abatements, but only in exchange for a longer lease term.
  • Due diligence. Owners commonly request tenant financials to confirm that the request for relief is due to COVID-19 and to determine if the tenant is able to fulfill the lease terms.
  • Lender assistance. Many owners seek assistance from their own lenders to help them pay for property maintenance, taxes and insurance during periods when tenants are deferring rent payments. Lenders have been amenable to borrowers deferring principal payments as long as they can demonstrate need and maintain the property.

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Working Together as a Team: Negotiating with Commercial Tenants During COVID-19

September 24, 2020 By

The COVID-19 pandemic caused widespread mandatory closures of all types of commercial properties. These closures, along with reduced consumer spending, have hampered business operations and created challenges for many businesses that lease office and industrial properties – some of which have asked their landlords for assistance in the form of rent abatements or deferrals.

Landlords facing this issue should refer to a research brief issued by the NAIOP Research Foundation that identifies best practices for triaging office and industrial tenant requests, offering reasonable accommodations to those tenants who need short-term assistance and responding to affected tenants.

Based on input from brokers and building owners as well as NAIOP data, the brief identified these common practices:

  • Rent relief. Building owners are generally willing to offer tenants reasonable rent relief to help them weather short-term disruptions due to COVID-19. The most common practice is to offer tenants a few months of deferred – not forgiven – rent that can be repaid over the remainder of the lease. Some landlords also agree to rent abatements, but only in exchange for a longer lease term.
  • Due diligence. Owners commonly request tenant financials to confirm that the request for relief is due to COVID-19 and to determine if the tenant is able to fulfill the lease terms.
  • Lender assistance. Many owners seek assistance from their own lenders to help them pay for property maintenance, taxes and insurance during periods when tenants are deferring rent payments. Lenders have been amenable to borrowers deferring principal payments as long as they can demonstrate need and maintain the property.

The post Working Together as a Team: Negotiating with Commercial Tenants During COVID-19 first appeared on Century 21®.

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Getting Back to Work Safely

August 5, 2020 By

As many states move to reopen businesses affected during COVID-19, it’s essential that building owners, managers and tenants follow safety guidelines to keep employees and customers safe.

The best way to do this is to review safety resources from the Centers for Disease Control and Prevention, which include general mitigation strategies as well as specific guidance for restaurants, bars and casinos.

For office buildings, for example, the CDC recommends that the following steps be taken before resuming business operations:

  • Evaluate the building and its systems to determine if it’s ready for occupancy. Check for hazards such as mold growth.
  • Ensure that ventilation systems are operating properly.
  • Increase circulation of outdoor air by opening windows and doors and using fans.
  • Ensure water systems are safe to use to minimize the risk of Legionnaires’ disease.
  • Identify where workers might be exposed to COVID-19 and develop controls to reduce transmission.
  • Encourage sick employees to stay home and conduct daily health checks.
  • Stagger shifts if feasible.
  • Require masks when social distancing isn’t possible.
  • Clean and disinfect high-touch surfaces.
  • Post instructions on hand hygiene, COVID-19 symptoms, wearing masks and cough and sneeze etiquette.

Establishing a system to cover each touch point can help ensure your work environment is safe for your clients, and employees.

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Getting Back to Work Safely

August 5, 2020 By

As many states move to reopen businesses affected during COVID-19, it’s essential that building owners, managers and tenants follow safety guidelines to keep employees and customers safe.

The best way to do this is to review safety resources from the Centers for Disease Control and Prevention, which include general mitigation strategies as well as specific guidance for restaurants, bars and casinos.

For office buildings, for example, the CDC recommends that the following steps be taken before resuming business operations:

  • Evaluate the building and its systems to determine if it’s ready for occupancy. Check for hazards such as mold growth.
  • Ensure that ventilation systems are operating properly.
  • Increase circulation of outdoor air by opening windows and doors and using fans.
  • Ensure water systems are safe to use to minimize the risk of Legionnaires’ disease.
  • Identify where workers might be exposed to COVID-19 and develop controls to reduce transmission.
  • Encourage sick employees to stay home and conduct daily health checks.
  • Stagger shifts if feasible.
  • Require masks when social distancing isn’t possible.
  • Clean and disinfect high-touch surfaces.
  • Post instructions on hand hygiene, COVID-19 symptoms, wearing masks and cough and sneeze etiquette.

Establishing a system to cover each touch point can help ensure your work environment is safe for your clients, and employees.

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The WeWork Effect

November 14, 2019 By

Much has been written recently about the upcoming initial public offering by WeWork. But less has been written about the company’s impact on the cities in which its co-working facilities are located.

WeWork claims to have a positive impact on not only the companies leasing space from it, but also surrounding businesses. So Moody’s Analytics REIS Chief Economist Victor Calanog and Economic Analyst Keegan Kelly set out to explore whether this promised benefit is really happening. The two recently released a case study using New York City as its subject. Here’s what they found:

  • While rents and occupancies might have changed in four nearby office buildings studied, there was no discernible effect that could be attributed to WeWork’s entry into the area.
  • Of four nearby apartment buildings studied, there was no relationship found between rent levels or vacancy rates as a result of WeWork.
  • There was one measurable result: “Average rent levels of surrounding office buildings experienced a decrease in standard deviation from the mean, with ranges tightening, following the signing of the respective WeWork leases.” This means that WeWork causes rent levels to converge by setting a rent level that surrounding office building managers feel compelled to follow.

The authors concluded that the bottom-line effect of WeWork was ambiguous, summing up the effects as follows: “Despite claims of raising economic activity and business vitality in places where WeWork enters, it was never reasonable to believe that WeWork’s presence would be a tide that lifts all boats, with unambiguously positive effects. The more appropriate analogy is that WeWork is like a pebble cast into a pond, disturbing and changing the ecosystem.”

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Apartment Industry and its Residents Contribute $3.4 Trillion to the Economy

October 16, 2019 By

A new study commissioned by the National Apartment Association and the National Multifamily Housing Council reveals that the apartment industry and its residents contribute more than $3.4 trillion to the national economy. The report, We Are Apartments, provides a detailed breakdown of the economic impact nationally, by state and in 50 metro areas.

Highlights from the report include:

  • Resident spending contributes $3 trillion to the U.S. economy, while operations adds $175.2 billion. New construction contributes $150.1 billion, and renovation and repair add $68.8 billion.
  • In 2017, there were 346,900 apartment completions, up from 129,900 in 2011. Previous research had found that an average of 328,000 apartments were needed per year to meet existing demand. The number of multifamily completions was surpassed only twice since 1989.
  • A significant portion of existing apartment stock will need to be renovated in the coming years.

The study breaks down all the data by state and metro area. Visitors to the website can also use an Apartment Community Estimator, a tool that allows users to enter the number of apartments of an existing or proposed community to determine its potential economic impact.

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National Rent Report: Which U.S. City Has the Highest Rents?

April 9, 2019 By

Zumper, an online rental marketplace, recently released its National Rent Report for March, which ranks apartment rents for 100 U.S. cities. San Francisco again topped the list, with a median of $3,690 for a one-bedroom—much higher than the national median of $1,208. NYC, at $2,870, was second.

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5 Ways to Curate Retail in Mixed-Use Property

February 20, 2019 By

Savvy owners of retail properties understand the importance of achieving the perfect tenant mix. After all, the success of their shopping center may depend on it. That’s because a good tenant mix creates synergies that benefit both tenants and landlord.

Now that concept is being extended to mixed-use projects, where developers are carefully curating the tenant mix to ensure that retailers complement one another and ultimately benefit the tenants as well as themselves.

Here are five tips for curating retail at your mixed-use property:

  • Understand your market and your project. Remember that retail is viewed by tenants as an amenity, so be sure to select retailers that meet the needs of your tenants as well as the neighborhood. Retailers should help create a sense of community at the property. One example: a coffee shop, where residents gather.
  • Seek out experiential retailers—fun, hip stores that attract visitors because they provide them with experiences or entertainment. One example: Sur La Table, which not only sells cooking supplies but offers cooking classes.
  • Start early. The days of building a project and then leasing it up are over. Evaluate tenants during development or construction, and sign them on early.
  • Mix it up. People who choose to live in a mixed-use project are seeking a live/work/play lifestyle. Make sure that retail tenants provide for all needs of residents wanting convenience.
  • Curate tenants in offices too. Some owners of large office buildings are already adding curated retail on the ground floor as the line between work and home dissolves for many hardworking employees. Businesses may consider it a benefit to offer employees easy access to a dry cleaner or hair salon, for example.

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