Xceligent’s most recent report on Atlanta’s industrial property market (download the Atlanta 2Q Industrial Market Report PDF here) is packed with great news for the property business – falling unemployment, high absorption, sliding vacancy rates, and a strong record of adding industrial-using jobs with almost 24,000 added year-over-year.
New Speedfactory To Set Foot In Cherokee County
The industrial growth in Atlanta metro is strong enough to compel international shoemaker Adidas to locate its newest factory there rather than Asia. A milestone in both local development and industrial automation, the “Speedfactory” headed for the Cherokee County / I-575 area northwest of Atlanta mirrors a similar Adidas facility running in Germany. The new factory is expected to produce 50,000 pairs of shoes per year while employing 160 workers.
3D Printing, Robots and Rap
The Speedfactory design is the result of a successful pilot program run by the company last year that relies heavily on technology and recycling to get the job done. 3D printers and automated manufacturing will meet with recycled polyester and plastic to produce shoes near to consumers in the US market. Boosting sales in the US is a major goal of the company, which has welcomed the recent endorsement of rapper Kanye West to reattach the elusive characteristic of “cool” to the brand, perhaps lost since the 1980s heyday of early rappers Run-DMC.
At 70,000 SF, the new Adidas project joins 2.5 million SF of light industrial inventory online as of 2Q in Atlanta’s Cherokee County area. The suburb’s light industrial space has seen a minor negative absorption in 2Q16, with 4,400 SF of space newly available from Jan 1.
The new Speedfactory is scheduled to open in the second half of 2017. Download a PDF of Xceligent’s Atlanta 2Q2016 Industrial Market Report here.
Imagine it’s closing day on a sale you’ve been working on for half a year. You’re the buyer’s agent, and you’re still on duty. The instructions for money wiring arrive; your legal staff reads the email and executes the bank transfer per the instructions.
The sum is debited from the buyer’s account, but the proceeds never arrive at the seller’s account. A closer look at the email shows why: the instructions were fake. Someone — an attacker — knew the closing was today, knew the rough terms of the transfer, and knew which email to tamper with to replace the legit seller account wire transfer destination info with a criminal’s wire transfer info.
It was supposed to be a day for champagne and celebration. Instead, it’s a day for Advil and Rolaids.
Fact: Email Is Insecure
It is impossible to imagine the business world conducting itself without email. In only a single minute, users on the internet send 204 million emails. Yet, it is a fact that email is a deeply flawed business tool in one critical way: it was never designed for either security or privacy.
Email in its most basic form is plain text. When evaluating its security and privacy, consider email akin to a postcard: anybody handling a postcard has the ability to read what’s written upon it. Email traversing networks is sent overwhelmingly in plain text, very similar to a postcard: any machine (mail server) that collects or stores an email message is a repository of plain text.
An attacker who has access to a mail server’s messages will likely have the ability to perform searches, or filters, on hundreds of thousands of plain text messages, looking for interesting terms such as “account number” or “closing date” or “xxxx N. Main Street”. From there, tampering with critical, specific emails (such as ones that are sent during closing) is enabled.
More Subtle Than Viruses And Spear Fishing
We’ve all received weird email with bogus attachments (viruses) and links leading to places we’ve never seen before (spear phishing); most of us know to not trust such messages. But an attacker that is leveraging privileged information to tamper with email that contains wire transfer instructions is relying on familiarity instead of hoping you won’t notice an alien appearance to the email.
For these reasons and more, an electronic email message that contains wire transfer instructions, even when expected, is therefore best considered suspicious, and should be avoided.
What Are The Alternatives?
Because of these inherent security and privacy weaknesses in email, commercial real estate brokerages and law firms increasingly are reserving the communication of wire transfer instructions to non-email channels such as fax or telephone calls between familiars. While not perfectly secure, using voice or fax calls to communicate these details greatly heightens the required commitment and difficulty level on the part of an attacker. No longer are simple text searches enough – and that alone improves the bottom line on security and privacy.
Of course, never ever take anything you read here at The Source as legal advice — and always retain qualified legal and technical counsel.
The kind of counselors, for example, who don’t just assume internet email is secure and trustworthy.
[The standard disclaimer certainly applies today: Never, ever take anything you read here at The Source as legal advice! Always, always seek the input of qualified counsel in advance of any business decisions you undertake! -WG]
In lease negotiations, it’s the understatement of the year to say “the devil is in the details”. Carefully combing through commercial lease terms will expose not only the devil, but also clues as to how he got there. It’s ineffective bargaining at negotiation time that can leave parties to a lease painted into a corner when important circumstances arise. Long after the negotiations are done, the skill level brought to bear on the job of bargaining looms large. As a property manager, broker, leasing agent or landlord, are your negotiation skills up to par? Or are you leaving money on the table?
As I’ve written about here before, one tremendous resource for learning about the art and science of negotiation comes from the Ivy League.
Free Report From Harvard Law Program On Negotiation
Get a fast and free self-check on your skills as a negotiator from Harvard Law School’s Program On Negotiation (PON). PON is a consortium program of Harvard University, Massachusetts Institute of Technology and Tufts University dedicated to studying the theory and practice of negotiation and dispute resolution. Their latest report is entitled How To Negotiate Better Business Deals, and it’s available for free from PON via download link below.
The free report covers a laundry list of techniques to improve negotiation effectiveness, including:
- Ask for a renegotiation – Most people have an innate desire to be fair and they may be willing to reopen a discussion before the end of your contract period
- Present a concrete case – By presenting clear evidence of a lopsided contract, you can appeal to the other side’s sense of decency and desire for a good faith negotiation
- Make attention-getting moves – Help your counterpart situ up and take notice by refusing to meet the contested contract terms
- Bring out the big guns – Sometimes a show of power works, so put heavy hitters in charge of negotiating contract revisions
- And while I can’t turn back time, Business Negotiation Strategies: How to Negotiate Better Business Deals also shared some critical business negotiation strategies that can help me get the deal right in the first place:
- Create breaks – Try experimenting with a shorter contract that allows for natural breaks for review and renegotiation
- Prepare for disputes – Disputes are often inevitable so add a clause to your contract that requires renegotiation, mediation, or arbitration in the event of a disagreement
- Avoid quick fixes – It’s not unusual to want to latch on to the fastest fix in a business negotiation; however, it’s best to take the time to make a careful decision.
Download the free Harvard Law PON report from this link.
The Urban Land Institute (ULI) wrote today about six ongoing trends that will continue to mark the national commercial real estate market in 2016 and maybe beyond. We know the basics and broad strokes of today’s national market already – very low inflation hand-in-hand with very low prime lending rates, improving employment numbers, and predictable demographic migrations as baby boomers and millennials find their new group positions for living and working.
Add to this a rising political uncertainty at all levels from local to national, aggravated by the heightened visibility of the genuine tax and civics postures of localities on social media. When every pothole in every community gets its own social media post, it heightens political acrimony while at the same time affects real estate investment and move-in decisions, perhaps unfairly.
ULI highlighted six enduring trends in a recent Urban Land Magazine piece by Peter Burley and David Lynn. The six of course touch on all the above and more. The top three are:
Global economic uncertainties: “The International Monetary Fund has downgraded global growth twice since January as uncertainties blur the outlook. For U.S. markets—real estate in particular—the impact is likely to be largely positive as U.S. assets become more attractive and valuable to global investors. We can probably expect enhanced inbound foreign investment in U.S. real estate markets as the United States becomes even more of a safe haven for investors worldwide.”
Steady interest rate environment: “We still believe that the Fed is more than likely to weigh the effects of each move it makes before adding any additional friction to current (if unspectacular) economic growth trends.”
Foreign investment in the US: “And, while slowing growth in China and much of Europe may dampen currencies and incomes over there, there is still abundant non-U.S. capital looking for placement and very strong demand for U.S. assets, as 2015 proved with record inflows.”
To read the entire piece with all six factors expected to affect national CRE markets, follow the link to the ULI piece.
Readers of The Source will recall my travails with keys from a couple of months ago, when I went to make some duplicate keys and found a robot doing a significantly worse job duplicating keys than human hardware store employees once did. Because there isn’t a commercial real estate broker, owner or property manager working today who doesn’t struggle with keys and locks, let’s take another look at cutting-edge key technology: the Nite Ize S-Biner Key Rack.
Nite Ize? S-Biner?
My pal Safety Jim, a born commercial property manager if ever there was one, told me about this nifty piece of gear right around the time we discovered the key-making robot I posted about back in June. Jim handles lots and lots different sets of keys every day, but I noticed that he doesn’t wrestle with steel rings keeping keys together. Instead, he rapidly attaches and disconnects keys from an odd bit of gear called a S-Biner Key Rack. It’s made by a company called Nite Ize, (pronounced “night eyes”). Based in Boulder, CO, Nite Ize products include flashlights, which explains the company name. The product name is a takeoff on the caribiner, an essential bit of mountain climbing gear that balances safety, speed and strength by controlling rope lines that are run through it.
The S-Biner treats keys and key rings like a carabiner treats rope: a innovative spring-loaded “S” shape allows super-quick attachment and removal of keys or key rings while providing pretty much stable locking of keys in place on the S-Biner. The time and hassle this saves compared to mating keys using steel rings is significant. It’s an absolute game-changer for property managers on the go; it even weighs less than the average master key ring, so it’s the kind of product that improves in ways you didn’t expect.
There is one area where the S-Biner pictured above can’t deliver the same thing that steel key rings can: absolute attachment security. A key can’t fall off a steel ring, but it is (very slightly) possible that a S-Biner attachment can disengage in an unwanted way, for example, when jostled inside a crowded pocket. After two months of testing this hasn’t happened, but because I see that it could, it’s worth mentioning. It’s also worth mentioning that Nite Ize makes a wide range of variations on the S-Biner design that address and “harden” against this small possibility by using a slightly more complicated locking design.
At well under ten bucks (under five for the S-Biner) these products are worth a look, if you ask me. (Or Safety Jim.)
Who says you can’t look back? National Association of REALTORS® has released its second quarter 2016 Commercial Real Estate Market Survey, and the takeaways appear pretty good for the national commercial real estate market picture for 2Q.
In June 2016, a random sampling of over 62,000 NAR members with an interest in commercial real estate was asked for their input. Nearly 1,000 responded with completed surveys, for a response rate of 1.6%. A quick look at the resulting numbers:
- Percentage of members completing a commercial lease transaction: 59%
- Average transaction value: $1.4 million
- Percentage of sales volume rise from one year ago: 8.4%
- Percentage of REALTORS who closed a commercial sale 2Q16: 66%
- Average cap rate nationally: 7.0%
- Percentage of sales price increase year-over-year: 5.3%
- Bump in leasing volume over previous quarter: 8.7%
Number One Concern: Inventory
When asked for their number one concern, responding NAR members answered that inventory trumped other concerns including bid/ask pricing gaps, financing availability, local and national economic conditions. Pricing and deal value averages are therefore expected to rise nationally as growing demand meets less-rapidly-growing supply.
NAR Members may download the entire report here (login required):
(Photo credit: Wikipedia)
In the commercial real estate investment world, one of the most important values to compare potential investment properties is the internal rate of return, or IRR. One way to think of this value is a display of the growth rate the project is expected to generate. It’s a number that, roughly speaking, describes profit after cost of capital is paid for. Real estate investment firms put so much stock into IRR that they commonly use it as a major deciding factor to greenlight a project or not. If a project’s IRR doesn’t meet or exceed the firm’s minimum acceptable return, or required rate of return (RRR), chances are that project is a no-go for the firm.
There is no single best method or toolset to calculate CRE finance variables, and what follows here is merely an illustration of the concept using Excel. Last month, Spencer Burton, a Milwaukee-based associate with Northwestern Mutual Real Estate Investments put together a very nice bit of screencast video showing veryc clearly how he assembles a IRR model in Excel, including hold times, cash flows, NOI and other elements that go into the model.
(Remember: nothing you read here at The Source constitutes legal or financial advice!)
If, during the past twelve months, you’ve gone to the capital markets and suspected that banks aren’t playing ball quite as much as before, a key survey of loan officers says you’d be right.
This week, the Federal Reserve Bank released its Senior Loan Officer Opinion Survey. The project looks at changes to the terms of commercial loans, including loans for commercial real estate. 71 domestic banks and 23 branches of foreign banks were heard from in this year’s survey.
CRE loan classes in the survey included construction and land development loans, loans secured by nonfarm nonresidential properties, and loans secured by multifamily residential properties.
The verdict: there’s been a change, and it goes against the CRE borrower. Even though demand for CRE borrowing has strengthened, commercial real estate lending standards are tighter than those reported in the July 2015 survey. The tightening has been for all of the four quarters that ended in June of this year.
From the report:
Regarding loans to businesses, the July survey results indicated that, on balance, banks tightened their standards on commercial and industrial (C&I) and commercial real estate (CRE) loans over the second quarter of 2016.3 The survey results indicated that demand for C&I loans was little changed, while demand for CRE loans had strengthened during the second quarter on net.
Responses to a set of special annual questions on the approximate levels of lending standards suggested that banks’ lending standards for all categories of C&I loans are currently easier than the midpoints of the ranges that have prevailed since 2005 (explained more fully below), except for syndicated loans to below-investment-grade firms. However, banks also generally indicated that standards on all types of CRE loans are currently tighter than the midpoints of their respective ranges. Compared with the July 2015 [survey], fewer banks reported easier levels of standards and more banks reported tighter levels of standards for all business loan types.
Commercial real estate is everywhere. Sometimes, that means that it can serve a purpose we didn’t expect.
The Federal Emergency Management Agency (FEMA) is the federal agency charged with responding to a disaster on American soil. FEMA’s responsibilities include accurately assessing the damage left by tornado, flood, hurricane or other disaster, so that good decisions can be made in its wake — how much water or food or shelter to bring, and to exactly where, for example.
It turns out that Waffle House, the classic American roadside restaurant chain known for staying open 24 hours, looms large in FEMA’s mission, and not just as a place to get hash browns scattered, smothered and covered.
As part of its assessment of how hard-hit an area is by disaster, FEMA measures in part by using an informal scale called the Waffle House Index. The thinking goes like this: as disaster impacts the local Waffle House restaurants, the impact upon waffle and coffee availability reflects accurately the severity upon the surrounding areas.
The chain, sporting more than 2,100 locations in 25 states, is well-known for staying open during extreme weather and reopening quickly after disasters. It’s that tenacity that helps FEMA gauge how serious an impact a disaster has left behind:
The term was coined by FEMA Administrator Craig Fugate in May 2011, following the 2011 Joplin tornado; the two Waffle House restaurants in Joplin remained open after the EF5 multiple-vortex tornado struck the city on May 22.According to Fugate, “If you get there and the Waffle House is closed? That’s really bad. That’s where you go to work.”
The Index has three levels, based on the extent of operations and service at the restaurant following a storm:
- Green: the restaurant is serving a full menu, indicating the restaurant has power and damage is limited.
- Yellow: the restaurant is serving a limited menu, indicating there may be no power or only power from a generator or food supplies may be low.
- Red: the restaurant is closed, indicating severe damage.
So hats off to the owners, operators and employees of the venerable house that waffles built. We knew they were there for us at four in the morning with eggs over easy, but who knew they were also on the front lines of disaster recovery?
Browsing through all 100+ pages of the 2016 NAR Commercial Member Profile released yesterday, I was struck by two things: a pipeline and a piano. (Correction for clarity: I wasn’t actually struck by anything, thankfully nothing as sizable as a piano. But I did notice two things right away.)
The data on transactions among Members arranged by years in the industry point to an enduring rule in the commercial real estate business about the transaction pipeline for new professionals. We can boil down the rule this way: the data says it’s going to take new folks about two years to hit their stride in terms of transactions, as it takes those two years for their deal pipeline to move to a “new normal” where transaction volume begins to resemble performance of more veteran careers. In other words, hang in there, new people. Keep adding value and being there for clients and the rewards will come.
The report comes this year accompanied by a nice video clip hitting the report highlights. It’s a solid bit of infographic work, but what caught my ear was the inspirational piano music.
The music was at once familiar and new. I couldn’t place it, so I pulled out my smart phone and used the music-identifying app Shazam to try and discover the title.
That’s when Shazam did something I’ve never seen it do before: it became very confused. At first it identified the track as “Señor Blues”, a classic jazz recording from the late 1950s by the Horace Silver Quintet. Right away I knew it couldn’t be that — for one thing, the recording is too digitally pristine to be from the 50s.
So I tried again. This time, Shazam placed it as Beethoven’s Romance No.2 in F Major. Get a grip, Shazam. Not even close.
Tried once more, and one more Shazam busted: it said we were listening to 19th-century Czech composer Bedrich Smatana’s “The Little Onion”. Incorrect, even if the title did pick up on the fact that I was hungry.
I guess even Shazam needs a couple of days off. Have a good weekend, everybody.