When the question “what kind of commercial property is hot” comes up,  the eternal qualifier applies: all real estate is local, your mileage may vary.

That said, there are widely felt economic trends concerning college education that are making the development of new student housing shine a little brighter than other kinds of development these days.  One reason is the general trend of privatization — the blurring of the line between between the public, tax-supported institution and the private investor.  This trend is showing up in all corners of the economy, turning public services into markets and supporting cash-strapped local governments with valuable investment capital without which they could not meet the expanding needs of the public.

In higher education, this translates to the reduction of state budgets driving universities toward a private development route in student housing. A recent piece by Jeniffer Duell Popovec in NREI highlights the situation by looking at the recent development activity of the largest and oldest real estate investment trust in the student housing space.  Business is booming in student housing:

The student housing development activity is driven by a number of factors in addition to the obvious supply-demand dynamic within the industry, according to Jamie Wilhelm, executive vice president of public-private transactions for American Campus Communities Inc. (ACC). He says higher education budget constraints, coupled with lengthy procurement and contracting processes, compel state-supported universities and colleges to seek out third-party development partners. Student housing REITs are involved with these schools to develop on-campus and off-campus housing.

ACC has largest development pipeline of all three student housing REITs, which makes sense given the fact that it’s also the largest and oldest REIT in the space. It has $593.4 million in owned development projects currently under construction with deliveries scheduled this fall and in 2013.

The developments are all core class-A assets close to campuses in their respective markets and on track to meet previously announced development yields in the range of 7 to 8 percent. ACC’s 11 new owned development projects scheduled to open this fall, which represent an investment of $385.4 million, are preleased at an average of 76.3 percent for the upcoming academic year as of April 20, 2012. Six of those assets leased above 90 percent.

…

The REIT says it has identified more than 200 markets and approximately 80 specific sites within these markets as potential future development opportunities. Its current business plan contemplates the development of approximately five to seven new student housing properties per year.

Has retail taken a backseat to the dormitory?  Are office buildings playing second fiddle to new campus amenities in the competition for development dollars?  One way to answer that question: student debt is federally guaranteed debt, and is credit extended to promote social mobility, e.g. the American Dream.  Does your local proposed shopping mall or office complex get to use that narrative when seeking financing and buy-in?

Probably not.

Related articles

• Commercial realty predicted to heat up in Q3 (chinapost.com.tw)
• Student housing landlords ‘should consider home improvements’ (ratedpeople.com)
• Residents reject new student housing projects all over the country (inspectingsunnyside.wordpress.com)

WASHINGTON (May 14, 2012) – The National Association of Realtors^® announced today a strategic alliance with Xceligent, Inc., a leading commercial real estate information services provider.  Xceligent recently acquired ePropertyData from NAR’s strategic investment fund, Second Century Ventures, to create a competitive national alternative in commercial real estate information.

As part of the REALTOR Benefits^® Program, Xceligent will be the exclusive provider of commercial real estate information services, including Xceligent’s flagship Premium Research Platform, which will cover the major U.S. markets; a National Public Search Service for marketing properties; and the two commercial information exchange products gained through the ePropertyData acquisition, which are the Basic Broker Loaded Platform and Basic Research Platform. This strategic alliance ensures preferred pricing for Realtors^®.

“As a Realtor^® who conducts commercial real estate transactions, I am proud NAR has entered into a game-changing partnership for the commercial real estate industry,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “Competition in this marketplace will greatly influence the way commercial real estate professionals conduct business long into the future and grow the industry as a result.”

“Xceligent is excited to partner with NAR at this ground-breaking moment in our industry’s history,” said Doug Curry, Founder and CEO of Xceligent. “Providing Realtors^® specially priced access to Xceligent’s proactively researched market information and our new National Public Search platform will energize their businesses and increase their efficiency, allowing them more time to be in front of their clients instead of their computers.”

“This strategic alliance with Xceligent represents the power of partnership within the real estate industry, and more importantly, reinforces how Realtors^® benefit from NAR’s REALTOR Benefits^® Program,” said Bob Goldberg, NAR senior vice president of Marketing, Business Development and Strategic Investments, and Commercial Services. “With the acquisition of ePropertyData, Xceligent is poised as a truly competitive alternative in the commercial real estate information services market.”

Details of the program will be released in coming weeks.

Xceligent, Inc., a leading provider of commercial real estate information services, is based in Independence, Mo., and has 210 employees. Leveraging an efficient, research-focused model, Xceligent provides commercial real estate professionals with accurate and timely information on commercial real estate availabilities. Xceligent currently provides information services in 30 major U.S. metropolitan markets and has begun the national roll-out to cover the top 65 U.S. markets in 36 months with premium research services per the recently issued Federal Trade Commission consent decree allowing the CoStar/LoopNet merger to proceed.

NAR’s REALTOR Benefits^® Program offers practical solutions for Realtors^® on the products and services they use every day. The program includes offerings in a variety of categories from nearly 30 companies recognized as leaders in their respective industries.

The National Association of Realtors^®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Related articles

• NAR’s Second Century Ventures Announces Sale of ePropertyData (commercialsource.com)

May the Force be with you, goes the eternal line from Star Wars.  When it comes to commercial property development, sometimes the Force is exactly what you need.

For 25 years, filmmaker George Lucas, creator of Star Wars, has been embroiled in a struggle over his commercial real estate project.  Owner of a stretch of North Marin County land near San Francisco, the filmmaker has been trying to build a complete film studio on his property. He’s proposed and studied and modeled no small plan: 300,000 sq. ft. of modern filmmaking facility, complete with a restaurant, retail, parking for 200 cars. He’s been fighting to bring $300 million of economic impact to the area. In other words, it’s the kind of think-big commercial development our industry generally likes to see.

But sailing has not been smooth.  Luke Skywalker didn’t triumph overnight, and neither has Lucas.  The past quarter-century has pitted him against his Marin County neighbors, who have opposed the project on the grounds that it would do exactly as Lucas says: bring a lot of economic impact, and with it, foot traffic and activity they don’t see as conducive to residential property value.

In some ways, it’s a classic struggle — not between good and evil to be sure, but between the rights of property owners to use the force of property rights to build what they want. That’s our system, and commercial interests don’t always win out over residential ones.  This week, Lucas announced he was ending his battle to develop the land into a studio.

He would instead use the land to develop…low-income housing.  In a statement, Lucas turned his neighbors’ objections on their head: “If everyone feels that housing is less impactful on the land, then we are hoping that people who need it the most will benefit.”

The local homeowners association has been such a thorn in Lucas’ side that he’s decided to abandon the studio construction entirely, issuing this official statement about Lucasfilm’s withdrawal of the new studio:

The level of bitterness and anger expressed by the homeowners in Lucas Valley has convinced us that, even if we were to spend more time and acquire the necessary approvals, we would not be able to maintain a constructive relationship with our neighbors.

We love working and living in Marin, but the residents of Lucas Valley have fought this project for 25 years, and enough is enough.  Marin is a bedroom community and is committed to building subdivisions, not business.  Many years ago, we tried to stop the Lucas Valley Estates project from being built, but we failed, and we now have a subdivision on our doorstep.

So what is George Lucas going to do with his property now that he’s tired of his rich neighbors putting up a not-in-my-backyard stink? He wants to transform the property into low-income housing, naturally, ending their official statement with this zinger, “If everyone feels that housing is less impactful on the land, then we are hoping that people who need it the most will benefit.”

He’s working with the Marin Community Foundation to instead construct affordable housing for either low-income families or seniors living on small, fixed incomes. In order to smooth along the development, he’s already given them all of the pricey technical studies and land surveys Lucasfilm spent years conducting.

Property rights.  Gotta love ‘em.

Related articles

• After 25 Years, George Lucas Caves to NIMBYs in Lucas Valley Project (sfist.com)
• Lucas moving ahead with affordable housing plan (seattletimes.nwsource.com)
• Officials Scramble To Keep George Lucas’ Proposed Mega-Studio In Marin (huffingtonpost.com)

NAR Chief Economist Lawrence Yun blogged the latest Economic Update, wherein the research staff analyzed recently released economic indicators pertaining to unemployment and imports and exports.

For commercial practitioners, the news is encouraging, particularly in the international trade indicators.  In March, imports and exports climbed.  Compared to a year ago, imports rose 8.4% over last year, while exports hiked 7.3%.

Imports and exports are perceived as a leading indicator for leasing and purchasing demand in industrial and warehouse properties.  The general idea being that you can’t service heightened demand for exports without more industrial and warehouse capacity.  On the reverse side, meeting heightened demand for imports requires more access to warehouse space along major trade routes.

(Readers interested in ideas as to where these routes will grow might be interested in Sam Fisher’s talk on the future of Warehousing, where the head of industrial practice at Jones Lang LaSalle addressed the NAR Commercial audience at the 2011 convention.)

Lawrence Yun goes on to describe the role of international trade in broad terms applicable to CRE:

• Though the widening trade deficit will hold back current economic growth by a few decimal points, the broad increases in international trade is critical to a long-term rise in standard of living.  Extra international competition always forces companies to shape up and drive towards efficiency while consumers are exposed to better products.
• The falling international trade in 2008 and 2009 were due to the harsh economic recession, when the U.S. economy lost 8 million jobs and the number of people filing for unemployment checks skyrocketed.  The Great Depression of the 1930s was also associated with a major collapse in international trade.  Many European countries after the First World War sunk into terrible economic hardship as many newly created small-sized countries started to impose foreign tariffs (say between Croatia and Austria) which previously had not existed as part of the Austrian-Hungarian Empire.  The disintegration of Soviet Union and its equivalent of the Great Depression in the 1990s was also associated the sudden collapse in border trade, say between Ukraine and Russia.  In a more recent example, North Korea today is one of the poorest countries in the world because it believes principally in domestic production without foreign competition.

Related articles

• China’s industrial production rises/France and Greek industrial production fall badly/Greek unemployment rises to 21.7%/ (sgtreport.com)
• Business insurance holders ‘have boosted the export market’ (premierlinedirect.co.uk)
• Warehouse: Ensuring Efficiency with The Production Process (athingforcars.com)

Second Century Ventures, the strategic investment arm of the National Association of Realtors^®, has sold ePropertyData (ePD) to Xceligent to create a competitive national alternative in commercial real estate information.

Xceligent will leverage ePD’s commercial information exchange (CIE) solution to help expand its existing coverage of fully researched commercial real estate information into the largest U.S. markets. ePD provides commercial real estate information in markets across the country and powers NAR’s current national public commercial real estate search  platform, which already contains more than 200,000 active lease and sales listings. ePD’s research tools will be enhanced and incorporated into Xceligent’s research center.

Read the full release on Realtor.org

As we’ve written about before, recent proposed changes to accounting standards would have enormous impact on commercial real estate leases.  NAR has been on the forefront of calls to ensure proposals do not adversely impact our industry.

What might not be clear is that these changes impact not only commercial real estate, but all commercial leasing in general.  That means that our industry is one of a set of industries that do business using leases and for whom these accounting standards changes would bring major changes to business and markets.

While reading up on the impacts to commercial real estate first and foremost will get you caught up on the impacts to our industry, you don’t need to stop there.  The Federal Accounting Standards Board, FASB,  the body who is undertaking the proposal to make the accounting changes, has made public over 800 comment letters from around the world on the matter of lease accounting standards changes.

The renting of everything from trucks to planes to equipment, the markets for life insurance, the use of service contracts are all potentially touched by these proposed standards changes.  With over 800 letters to choose from, FASB has done us a valuable service in collecting in one spot so many voices from the business communities that depend on leases and their accounting rules. Reading through the comment letters shows in how many ways these accounting rules changes, if adopted, can wreak havoc on a wide set of industries and produce negative consequences far beyond the ills the changes are meant to address.

Related articles

• The Importance of Negotiating for Lease Flexibility (tompappasrealestate.com)
• Your Voice On The Hill: NAR Commercial Advocacy Timeline (commercialsource.com)
• The Business of Lease Comps (coydavidson.wordpress.com)

The new Realtor.Org

Let’s take a look at the latest in NAR Commercial member benefits, online resources and advocacy.

NAR Treasurer Bill Armstrong’s Latest Podcast

Titled “Advocacy and Advantage”, in his latest podcast Bill outlines NAR’s Commercial’s latest efforts on Capitol Hill.  Advocacy in Congress has focused on new legislation to allow credit unions to increase lending caps.  As we’ve gone over several times here at The Source, credit availability is the biggest sticking point holding back a full recovery in the CRE industry.  NAR support for increase of lending caps has led to promises of a vote very soon.   Also on NAR’s advocacy docket is support for legislation to create a covered bond market Already in successful use in Canada and Europe, covered bonds would increase credit to the CRE industry by allowing banks to issue pools of high-quality assets backed by both the bank’s promise to repay as well as by the assets pledged as collateral.  Listen to the latest from Bill at the podcast here.

The New Realtor.Org

Members have a lot to like in NAR’s new website at Realtor.Org.  Not just a facelift, this is a ground-up rethinking of how to deliver member benefit, which is of special interest to commercial members.  While the residential and commercial issues in our industry overlap somewhat, it’s a constant challenge to satisfy the interests of individual members and their disparate backgrounds.  The new website addresses this nicely by allowing members to customize it to fit their own needs.  Cool!

New NAR Rewards Program: MVP

Not only can commercial practitioners customize the kind of news they wish to receive, they can earn rewards while doing it.  To encourage commercial members to take action on the issues that affect the commercial property industry, NAR has rolled out the Member Value Plus program, or MVP.  To learn more, check out the what, how, when and why at http://www.realtor.org/mvp.

REALTOR Rally To Protect The American Dream and Midyear Expo

Make your voice heard on May 17th in Washington at the REALTOR® Rally To Protect The American Dram.  The site has been moved to the base of the Washington Monument – get all the details at the REALTOR® Rally website.  And we hope to see you at the NAR Midyear Legislative Meetings and Trade Expo also in DC May 14-19th.

Related articles

• NAR: Apartment Rents Up From A Year Ago (commercialsource.com)
• NAR Commercial Lending Survey Shows Lenders Obstructing Small Business (commercialsource.com)
• NAR Commercial Podcast: Rally For Real Estate In Washington (commercialsource.com)

Economic recovery is here – but is it just for the biggest commercial real estate deals?  Are lenders failing — again — to support our industry by extending credit only to heavy hitters and leaving the rest behind?

That’s the finding of NAR Commercial’s latest Commercial Lending Survey.  Although commercial RE markets show signs of recovery, commercial lending standards have actually tightened in the past year for small businesses and “scuttled a major portion of contracted transactions for smaller properties”.

$2.5 Million Cutoff?

Lawrence Yun NAR chief economist, said there is a significant split in commercial lending  depending on value. “This is very much a tale of two markets. There have been notable improvements in capital for large commercial transactions  valued at $2.5 million or higher, but there remain significant  challenges for small business,” he said.

Lack of credit hitting our deals hard

Yun continued: “Our Realtor members typically are involved in helping commercial clients with purchases under $2 million, where a lack of capital has caused two out of three respondents to report deals have fallen through.  Given that most jobs are created through small business, the lack of  capital is hurting small businesses and the overall economic recovery.”

According to Real Capital Analytics, more than 13,000 major properties valued at $2.5 million or higher traded hands in 2011. Sales volume  increased 51 percent over 2010 to $205.8 billion, with the lion’s share  of lending funds coming from big banks. Other funding sources include  insurance companies and institutional investors.

By contrast, the NAR survey shows that small business transactions rely heavily on smaller regional and local banks, and small private investors, for lending capital.

Respondents indicate nearly 30 percent of smaller commercial properties are purchased with cash, reflecting the tight credit environment, and  some are seller financed. “When credit is tight, cash is king,” Yun added.

Backlog impeding the wider market

NAR members say the market is clogged with property that needs to be sold or refinanced. Financing for long-time investors who had no trouble before is being turned down routinely by lenders, with 23% of respondents reporting lending standards are more stringent and more than half of survey respondents claiming lending is just as stringent but not near historical averages.

The big question

With big lenders’ fingerprints all over the economic collapse of 2007, with their enormous bailouts afterward and now, mounting evidence that they are applying the brakes to a wider commercial recovery now, one has to ask of some of our pinstriped friends: with friends like this, who needs enemies?

Related articles

• Study: Lending to small business stalls in March (seattlepi.com)
• NAR 2012 Commercial Outlook: Vacancies Down, Rentals Rise Expected (commercialsource.com)
• Are Banks Finally Getting Ready to Lend? (smallbiztrends.com)

Building construction (Photo credit: Toban Black)

The Commercial Real Estate Development Association, NAIOP, released a positively sunny report from the construction sector that showed a greater than 12% bump in spending on construction from 2010 to 2011.

Construction is a leading indicator for a whole raft of economic outcomes:

The total economic impact of the development (pre-construction, construction and post-construction) of commercial real estate during 2011 added $261.6 billion to the GDP, compared to $231.7 billion in 2010, a 13 percent increase, according to the report.

“2011 was a transition year for the U.S. economy and the construction sector,” said the report’s author, economist Stephen S. Fuller, PhD, Dwight Schar Faculty Chair, University Professor and the Director of the Center for Regional Analysis at the George Mason University. “The U.S. economy shifted from a federal stimulus to private-sector driven growth pattern and construction spending grew accordingly.”

While the role of stimulus remains a contentious one given the catastrophic trajectory the market was on prior to the application of stimulus, there is less controversy around the link between construction spending and follow-on effects elsewhere in the economy.

2011 was the first year to post gains in development and construction of commercial real estate since the recession began in 2007,  according to NAIOP’s report, How Office, Industrial and Retail Development and Construction Contributed to the U.S. Economy in 2011, released May 1. The total economic impact of the development (pre-construction, construction and post-construction) of commercial real estate during 2011 added $261.6 billion to the GDP, compared to $231.7 billion in 2010, a 13 percent increase, according to the report.

Construction spending on commercial real estate totaled $92.3 billion, a more than 12 percent increase over 2010. This spending supported nearly 2 million jobs nationally.

The increases in construction spending and activity resulted in the building of 238.3 million square feet of new space, an increase of 2.5 percent from 2010. This new space has the capacity to house 610,000 jobs with an annual payroll of $26.8 billion.

Related articles

• U.S. Bank Whets Construction Lending Appetite in Silicon Valley (blogs.wsj.com)
• 360 Commercial Partners Announces Platinum Sponsorship of NAIOP SoCal’s Chapter (prweb.com)
• Multi-family Building Market, Meet The “Rentysomthings” (commercialsource.com)

Ohio State Legislature - Photo by Eric Albrecht

Commercial broker lien laws are on the books in 26 of the 50 states.  These pieces of legislation speak to the right of commercial real estate brokers to attach a lien on a commercial property when a commission that is due goes unpaid.  Many of the states with such laws have seen recent passage or update of legislation.  Other states may be considering similar legislation.

Below, find a list, complete at press time, of the 26 states that have commercial broker lien laws on the books, along with a handy link to a Google search on each topic.  Please remember that nothing you read here constitutes legal advice and that you should always contact your attorney before making any decisions concerning law in your practice!

Alabama
Arizona
Colorado
Connecticut
Florida
Georgia
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maine
Maryland
Michigan
Missouri
North Carolina
Nevada
New Hampshire
New York
Oklahoma
Ohio
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Washington
Wisconsin