Consider an office building that comfortably supports 2,500 workers…with fewer than half as many desks. A building where all the lighting panels are connected by ethernet cable, making every panel controllable and customizable using an smartphone app. A building sporting enough photovoltaic solar paneling to power the entire footprint, including electric car charging stations at the parking lot. A parking lot that recognizes your car and directs you to an empty spot in the morning.
These and more high-tech features are all part of Amsterdam’s fifteen-story, 430K S.F. office building dubbed The Edge. The tower is home to international consulting firm Deloitte, who helped work on the technology, providing both technical capability and the all-important tenant’s perspective at the same time.
Owned by Germany-based Deka Immobilien and designed by London’s PLP Architecture, The Edge has been lauded for its sustainable features and deep designs that even repurpose rainwater to flush its toilets. The project is a living proof that the challenges of energy and resource efficiency can meet and be mitigated with the demands of tenants. The building systems do not create perfectly seamless solutions with every feature, but it’s a clear leap forward into a future where office experiences will leave the 20th century behind.
On this week’s earnings call, General Growth Properties CEO Sandeep Mathrani took a question about today’s foot traffic in GGP’s numerous malls located nationwide. In the answer was a piece of news the retail property world only might have anticipated: Amazon.com is planning on a radical expansion of its brick-and-mortar efforts. Currently, Amazon operates only one shop in Seattle, but Mathrani suggests the number is about to explode.
“You go to Amazon opening brick-and-mortar book stores, and their goal is to open, as I understand, 300 to 400 bookstores,” the CEO said. “It’s a very interesting evolution, because the cost of the last mile is that important,” Mathrani said to investors. “The mall business, if you appreciate that it’s more focused on fashion, is very different than a staple business where you’re buying commodity. In the mall business, the impact of eCommerce is a lot less—it’s actually your friend, not your enemy.”
While this statement doesn’t qualify as any more than a rumor — Amazon declined comment to the original reporters at Ars Technica — there is a logic to such a move.
As shipping prices rise — it makes sense that ship-to-store options will be increasingly demanded by online retail customers, which could be the come-on that puts numbers of e-tailing customers back into their cars to come to the shopping center. In December, UPS and US Postal Service raised rates approximately 5% and 9.5% respectively, which, when matched with steeply rising volumes of parcels, ensures that the bite from shipping costs will loom large on Amazon’s bottom line going forward.
It’s worth noticing that the retailing operations formula that supports ship-to-store appears to apply an upward pressure on square footage demand at lease time, because such stores will have to carry out a mini-warehouse role in addition to traditional customer-facing retail. These hybrid footprints will be necessary to keep up with the demands of customers who want what they want when, where and how they want it.
Through its Commercial Innovation Grant program, he National Association of REALTORS® (NAR) is interested in funding “game-changing ideas that deliver a benefit to commercial members or add value to commercial real estate professionals.”
Grant applicants can be local associations, or individual members who are deemed to meet the innovation criteria. The full list of criteria, found on the program application, touch on measurability, budget, educating the genera: membership, and other key criteria.
Download the 2016 Commercial Innovation Grant application here.
- Not all applicants receive grants.
- NAR does not fulfill requests for funding towards general Operating Expenses.
- If you have received a 2015 Innovation Grant you must have submitted your 2015 Executive Summary in order to be considered for a 2016 Innovation Grant.
Applications must be submitted by February 29, 2016, to be eligible for consideration. Grant recipients will be selected by March 31, 2016 and notified via email.
Imagine: six million (and counting) square feet of warehouse space, with a mind-boggling potential for fourteen million. A location central to the US. And climate that never strays from 65-71 degrees Fahrenheit.
There’s only one catch: it’s 100 feet underground.
Welcome to Subtropolis, the commercial space under Kansas City, MO that started as limestone mines and has since developed into a logistics and storage solution for 53 businesses employing over 1,700. Tenants include the US Postal Service, a film cold storage facility housing reels of “Gone With The Wind” and “The Wizard Of Oz”, as well as a University leasing out classrooms. The complex got going in the 1950s when its first tenant – a NASA scientist seeking controlled conditions to test equipment – moved in.
Check out Subropolis’s site here. And enjoy the coverage by Kansas City channel 41 News.
It sure gives a whole different meaning to the term “underground economy”.
Texas oil attorneys Charles Sartain and Brooke Sizer wrote today about an interesting Louisiana case concerning the challenge of a 108-year old lease of mineral rights. The plaintiffs are the lessor in the case and the defendant, Exxon Mobil, is the lessee.
In 1907, leases on over 3,000 acres of land in northwestern Caddo Parish, LA were executed by the plaintiff’s predecessor to the defendant’s predecessors, who sold the mineral rights to Standard Oil (now Exxon Mobil) in 1920.
The lease terms spell out that the leases were granted “for a term of ten years from date hereof and as much longer thereafter as gas or oil is found or produced in paying quantities […]”.
And that’s where the fun begins, because the lessor believed the lessee was failing to drill deeper than 6,000 feet, even though there are hundreds of shallow and productive oil wells on the property. The lessor asked for cancellation and release of the portion of the leases below 6,000 feet.
Long story short: Exxon wins. To find out why — and to learn why 99 year lease term limits in this case did not apply, check out the entire JDSupra post by Sartain and Sizer (and enjoy the wonderful baseball metaphors put on display in the telling of the tale).
Additional background: a link to the appellate court case spelling out the facts.
In Miami-Dade County and Manhattan, be prepared this year for unprecedented federal oversight in the real estate deal space. Prompted by worries about money laundering, the US Treasury Department has announced it intends to require certain US title companies to identify the natural persons behind shell companies that are used to pay all cash for high-end luxury real estate.
While the effort concerns luxury residential property, it serves as a reminder that legal and legitimate structures such as LLCs (limited liability corporations) that are often used to structure commercial property transactions could be facing greater scrutiny, potentially impacting the opacity that entirely legal transactions might seek.
“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address.”
Real estate is becoming a larger target for law enforcement as well. According to two people with knowledge of cases at the Justice Department, lawyers there have begun to shape cases directly around money laundering in real estate deals rather than adding such transactions to other cases.
The F.B.I. has in recent months created a new unit to focus on money laundering, and real estate will be one main focus. The unit, which has 10 agents, will help the Justice Department delve into shell companies and the people involved in money laundering, F.B.I. officials said.
“We’re going after the facilitators of the money laundering,” Mr. Fallon, of the F.B.I., said. “They’re the bankers, they’re the accountants, lawyers, folks who are setting up L.L.C.s, they are setting up foundations, folks who are setting up nonprofits, real estate investment trusts, etc.”
Read the entire NYT piece here:
U.S. Will Track Secret Buyers of Luxury Real Estate
Last week saw the publication of the latest Beige Book, the six-times-annually published economic activity report from the Federal Reserve Bank that looks at the whole country divided by Federal Reserve Districts. You can read the entire Fed Beige Book after the link. Below find the key takeaways for commercial real estate nationally:
Real Estate and Construction (Nationwide)
Most reporting Districts characterized nonresidential real estate activity as modest to moderate; Boston and New York indicated little change. Rental rates rose in more than half of the reporting Districts, and vacancy rates were mixed. Most Districts reported modest or moderate growth in commercial construction, and the Dallas District noted high levels of industrial construction in Dallas-Fort Worth. Contacts in the Atlanta District expect construction activity to increase slightly, while contacts in the Philadelphia, St. Louis, Minneapolis, and Richmond Districts expect overall commercial real estate activity to continue to strengthen at least modestly.
Banking and Finance (Nationwide)
Lending activity appears to have improved on net. Loan demand grew on balance in the Philadelphia, St. Louis, and San Francisco Districts. Cleveland, Richmond, and Kansas City reported stable credit demand, on balance, while Dallas noted some recent softening. Philadelphia reported the strongest loan growth for autos, commercial real estate, and commercial and industrial deals, while residential lending was flat to down.
Banking and Finance (Chicago District)
Financial conditions tightened slightly on balance over the reporting period. Financial market contacts noted greater illiquidity in the bond market. In addition, a contact in commercial real estate financing reported a decline in interest from institutional investors amid concern that the commercial real estate market was overheated.
Construction and Real Estate (Minneapolis District)
Commercial real estate activity was moderate to strong since the last report. Retail, office, and industrial vacancies in Minneapolis-St. Paul have been falling and rents have been rising, according to multiple industry reports. In northwestern Montana, commercial vacancies “have mostly disappeared,” with rates stabilizing at about 5 percent, said a local source, while the Rapid City market “has been extremely active these last couple of weeks of the year.” […]
Commercial real estate professionals: the National Association of REALTORS (NAR) along with partners Deloitte and Situs RERC will once again release an annual commercial real estate market look-ahead for the year. The report, entitled Expectations And Market Realities 2016 will put together a wealth of research and data from a giant set of data providers, economists, analysts, survey respondents, reviewers, business associates and colleagues.
Concurrent with the report is the free webinar on February 4th: Commercial Real Estate Outlook: Will Capital And Demand Continue To Drive Prices? Presented by Deloitte partner Sally Flood, the webinar will provide insights into capital markets trends, macroeconomic conditions, details on main property types and the outlook into 2016.
Register for the free webinar here. The webinar will run on February 4, 2016 at 2PM ET.
The largest company on earth by revenue got a little smaller this month. Walmart, the Bentonville, Arkansas headquartered retail behemoth and largest employer in the world announced it would close 269 of its 11,600 stores globally as part of a review of financial performance and a portfolio management aligned with strategic goals. The move represents approximately 2.3% of stores globally and includes 154 US locations and 102 of the company’s smallest format stores branded Walmart Express. To see a full list of affected stores, follow the link.
Small Format Pilot Ended`
The Walmart Express pilot program explored the notion of Walmart opening small-footprint outlets to compete with neighborhood and small-town dollar stores. The strategy was assumed by many to be a no-brainer given the company’s record of trillions of revenue made on low-cost merchandise.
But the program was reportedly plagued with supply chain issues that in some cases put hypermarket-sized package goods on convenience-store shelves, straining what the neighborhood customer could be expected to carry home.
The closures, while significant, don’t exactly derail the retail juggernaut’s long-form tale of expansion. Over 200 stores are in the pipeline for opening in 2016, according to a company press release:
“Walmart will continue to invest in its future, with plans to open stores worldwide in the coming fiscal year. Domestically, Walmart intends to open 50 to 60 Supercenters and 85 to 95 Neighborhood Markets in Fiscal 2017, which begins Feb. 1. In the same period, Sam’s Club plans to open in seven to 10 new locations. Internationally, Walmart intends to open between 200 and 240 stores during the coming year.”
In total, approximately 16,000 associates will be impacted by the decision, about 10,000 of them in the U.S. More than 95 percent of the closed stores in the U.S. are within 10 miles on average of another Walmart, and the hope is that these associates will be placed in nearby locations. Where that isn’t possible, the company will provide 60 days of pay and, if eligible, severance, as well as resume and interview skills training. Whether with Walmart or elsewhere, the company’s objective is to help all associates find their next job opportunity.
“The decision to close stores is difficult and we care about the associates who will be impacted,” McMillon said. “We invested considerable time assessing our stores and clubs and don’t take this lightly. We are supporting those impacted with extra pay and support, and we will take all appropriate steps to ensure they are treated well.”
As reported in Bloomberg Business, Toronto-based Avison Young’s CEO Mark E. Rose doesn’t see the global boom in commercial real estate continuing in Canada. The indicators include rising vacancy rates in offices matched with new construction of 20 million sq. ft coming online across the country. Added to this is the recent move by the US Federal Reserve to raise borrowing costs plus the expectation that 2Q 2016 will see another hike by the central bank.
“We’re at a peak. I don’t think we’re getting any higher,” Mark E. Rose, chief executive officer of Toronto-based Avison Young, said in a phone interview. “The next step is down — it has to be,” Rose is quoted.
Bloomberg’s Katia Dmitreieva explains what’s behind the recent report and why the warning bells are sounding. Watch the video below: