A pair of articles today explain a new renaissance in Motor City commercial property and infrastructure centered on technology business expansion. Together they point out how this isn’t the economic and cultural stretch one might think for the town that so famously put its industrial eggs into one auto-making basket – and saw globalization and capital flight devastate its fabric when that industry chose foreign labor.
In Dan Rafter’s piece at REJournals.com Detroit A Tech Hub? You Bet the report mentions the recent Jones Lang Lasalle’s US Technology Office Outlook report that ranks Detroit among the top 30 in the US for total leases to the technology business.
You might be surprised to learn that Detroit has become a top target for tech start-ups. JLL in its U.S. Technology Office Outlook report ranked the city as among the top 30 in the nation for total tech leasing. What makes Detroit so appealing for tech firms? JLL pointed to low real estate costs, an affordable cost of living and a competitive pool of talented employees.
These factors are inspiring technology start-ups to open their doors in the Motor City. According to JLL’s research, the Detroit market is now supporting 50,796 tech jobs. JLL says, too, that Detroit’s high-tech employment rate is growing 4.3 percent each year.
The Detroit market has been home to some significant tech lease transactions. Griffels recently renewed its lease of 67,934 square feet in the Mars Corporate Center in Southfield, while Logicalis took out a 40,500-square-foot lease at 2600 Telegraph Road in Bloomfield Hills. Lochbridge recently took out a 29,000-square-foot lease at 150 W. Jefferson Avenue in Detroit’s CBD.
Electric Cars And A Fiber Freeway
Adding to the resurgence is more technology, both in infrastructure and in manufacturing target. Ford Motors has recently decided to invest $4.5 billion in the manufacture of electric and hybrid cars by 2020, which adds to the tech resurgence. As reported in GlobeSt. by Brian Rogal:
“One of the things that people don’t realize about Detroit is that the auto industry is heavily dependent on the high-tech sector,” Dave MacDonald, an executive vice president ofJLL, tells GlobeSt.com. And the recent decision by Ford to invest billions in electric vehicles will further boost the need for tech workers.
Another big factor bolstering technology companies here is the presence of Quicken Loans and its family of companies, which have bought up more than 80 downtown properties, many of them 75 to 100 years old, the type of structure most favored by tech-savvy millennials. “Quicken is really a tech company,” MacDonald says, and it has filled these buildings with about 13,000 workers, helping to send the CBD’s vacancy rate into a historic plunge.
And last month Rocket Fiber, a Detroit-based fiber-optic provider that is part of Quicken’s family of companies, has just activated an internet fiber ring for the city’s downtown that at an affordable price offers connections 1,000 times faster, MacDonald says. In its latest report on the US technolgy sector, US Technology Office Outlook, JLL compares it to “the Google Fiber model that spurred business and startup activity when it deployed in Kansas City.”
Affordable commercial property options and 21st century infrastructure in a great American central business district is the kind of news Detroit – and office tenants eyeing it – can surely use.
At NAR Expo 2015, the announcement came for the year’s winners of the National Commercial Awards. We offer our deepest congratulations to these leaders in their markets and associations!
As is so often the case, the credentials are strong with this group – you have Certified International Property Specialists (CIPS), Society of Industrial and Office Realtors (SIOR), Accredited Buyers Representatives (ABR), Certified Commercial Investment Members (CCIM) just to name a few of the distinctions these leading professionals have amassed.
2015 Winners Poster
Pick up a poster with all the winners printed on it by downloading a PDF right here.
2015 Winners Handout
Or get all the winners in a handy two-page handout format – grab that PDF from this link.
If you want to recognize the sterling achievements of a commercial professional in your association or market, it’s easy. Contact Shara Varner at SVarner@realtors.org
Is there anything more fundamental to commercial real estate than transforming a vacant lot into a profitable enterprise?
From coast to coast, the holiday season in the US sees the return of thousands of one type of classic small business that performs exactly that magic trick: the Christmas tree sales lot. On the surface, providing a local customers with their seasonal fragrant boughs might appear to be a simple affair. But any entrepreneur or property manager will tell you that there’s more than meets the eye to any successful business.
To that end, the Kirk Company, providers of Pacific Northwest Christmas trees for about the last hundred years, has published the amazing handbook “Successful Christmas Tree Lot Business Practices”. Packed with tips, planning steps and operation practices for the Christmas tree lot business, the handbook is a blueprint that touches on every aspect of location, layout, parking, retailing, staffing, up-selling – you name it.
If you’re like me, looking at a business makes you wonder about its specifics. This manual, with its exhaustive descriptions of one small business touchstone of the holiday season, is quite a gift to the curious.
Black Friday and Cyber Monday have come and gone and the season that makes or breaks the retail books is upon us. What are the must-read retail property stories from the big and the not-so-big markets? They’re all right here in the Retail Edition of the Commercial Real Estate News Roundup.
- Investing In Loyalty: How A Family-Run Chain May Upstage Big Brands – RetailCustomerExperience, Dec. 7, 2015 – Learn about Texas-based supermarket chain H-E-B and its strategies to break the “race to the bottom” in its numbers and expansions.
- RPAI REIT Works To Improve Retail Efficiency – GlobeSt. Dec 7. 2015 – Through space recapture, reconfiguration and whole host of retail portfolio management techniques, RPAI execs aim for long-term value.
- Free Webinar: How Millennials Are Disrupting Shopping – RetailCcustomerExperience, Dec 7. 2015 – December 10 at 2PM ET, learn the specifics of the generational changes in retailing and get a handle on how to broker and manage accordingly.
- These Three Retail Categories Are Growing – GlobeSt. Dec 7. 2015 – Partner in Atlanta-based corporate firm spots three retail categories on a growth pattern – specialty restaurant, health, and sporting goods.
- Tenant Issues Challenge Retail REITS – NREI, Dec.3, 2015 – The numbers are in, including projections for next year, and tenant issues loom larger than ever in profitability impacts nationwide for REIT portfolio managers.
- European Retail Property Deals Surge – WSJ, Dec. 1, 2015 – Learn about the almost 70 billion euro in retail property purchases across the continent in 2015.
- Retail Picks Up Steam In Downtown LA – Bisnow, Nov. 12, 2015 – A tripled residential population is driving a retailing frenzy in downtown Los Angeles.
- Baum Realty Puts Together $4.2M McDeal – ShoppingCenterBusiness.com – Dec. 7. 2015 – A 20 year new ground lease with staggered rent raises is suburban Chicago’s newest McDonalds deal.
- Tim Horton’s vs. Dunkin Donuts – Llenrock.com – Dec. 7 2015 – “As you are no doubt aware, donuts and coffee are the two greatest things in the world.” Couldn’t agree more, Mr. Eric Hawthorne.
- Inland Is Shopping For Shopping – GlobeSt., Dec 4, 2015 – Chicago-based property firm about to cross $40B milestone in total buys since inception. VP Mark Cosenza explains how.
Matt Faircloth of New Jersey’s Derosa Group is a small real estate investor getting bigger, and he took some time to make a good video about how. Getting investors together for a 13-unit multifamily property represented a big milestone – one that many in the residential space have on their minds as they eye ways to break into the commercial real estate industry.
Concise and personable, Fairlcoth’s clip tells the story of moving from investing in duplexes to a seven-figure property – snagging the building for below market to boot. Definitely worth a look.
In the commercial property finance ecosystem, the cost of money is tied to widely used benchmarks such as the federal funds rate. Ongoing rumblings from watchers of the Fed are that the cost of money — aka the Fed’s funds rate — are soon on their way up for the first time in nine years. Remarks from Fed Chair Janet Yellen leading into he December 15-16 Fed meeting seem to support the idea that a boost in rate is on its way.
Anticipation of a hike in the cost of money means that spread risk is coming to a commercial property near you. Spread risk is the risk of change in an interest rate that puts a lender or investor into less favorable terms than when the investment or loan was made. Spread in this sense usually means the difference in interest rate between that given by effectively nondefaulting securities such as US Treasuries and rates negotiated in the field – rates that govern financing and refinancing for properties in every sector of commercial real estate.
Checking Out Risk Pricing
A fascinating study in rate spread risk was undertaken by Integra Realty Resources, covered by Paul Bubny in GlobeSt. In “Where The Spread Risks Are,” we get a nice overview of the prices of risk, put into the context of various commercial property development types and loan-to-value ratios.
In the office sector, the widest average spreads can be found in single-tenant non-credit properties in three of the four LTV ranges. For the highest LTV category, 76% to 85%, that distinction falls to multi-tenant suburban properties, with spreads averaging 321 bps compared to 292 for single-tenant non-credit. Conversely, multi-tenant CBD office property loans were financed with lower spreads across all LTV ranges except on deals with an LTV of 76% to 85%.
For retail, IRR’s survey found that unanchored properties were financed with interest rate spreads averaging 35 bps higher than grocery-anchored properties during Q3. Financing of unanchored retail properties had a median interest rate spread of 264 bps during the quarter.
Packed full of well-presented national data on broad and specific trends in commercial real estate, it’s the latest installment of NAR’s Commercial Real Estate Outlook. Flip through the pages right here, or download a file with the full contents at www.realtor.org/reports/commercial-real-estate-outlook. This ongoing research project polls NAR membership nationally and takes the temperature of the commercial property market as viewed by its most essential professionals.
Some key takeaways: inventory availability — or lack thereof — is the #1 concern among membership. Also, average transaction price year over year rose four percent.
Check out the state of the national market!
REITs rejected, CBRE crunches numbers, and Utah’s tech boom – it’s all here in the Commercial Real Estate News Roundup for November 23, 2015. And a Happy Thanksgiving to everybody!
- CBRE Acquires Retail Analytics Firm – REJournals.com – Nov. 21, 2015 – National corporate firm snaps up a statistical analysis boutique, putting twenty scientists and analysts on the payroll to help retail figure out location and turnover.
- McREIT Cancelled – WSJ, Nov, 10 2015 – Rumblings of a spinoff of McDonalds property end with an announcement from the fast food giant.
- Macy’s Opts Out Of REIT Spinoff Too – Commercial Property Executive, Nov, 18, 2015 – Department store giant decides not to securitize its property.
- Nashville Plans 600K SF Industrial Park – The Tennessean – Nov. 9, 2015 – A nearly $2MM land purchase for 44 acres may prefigure a sizable warehouse park in the nation’s country music capital.
- Neighbors Fight St. Pete Golf Course Repurpose Into Warehouse – Nov. 4, 2015 – A closed 18 holes vs. a proposed 1.3 million sq. ft warehouse development – that’s the fight in Lakeland.
- Mixed-Use Proposal in Baytown Seeks To Capitalize On Houston Industrial Boom – Nov. 12 2015 – What does industrial development get you? More industrial development, often enough.
- Milwaukee Post Office Redev – Nov. 22, 2015 – A more in-depth look at the Chicago developer’s (huge) plans for Milwaukee’s former central Post Office.
- Utah’s Tech-Highway Sets Record – Nov. 4, 2015 – Check out a full rundown of the largest office construction boom in Utah’s history.
- Puget Sound Eyes 725K SF Project – Nov. 2, 2015 – Puget Sound Business Journal – Amid a significant amount of competing projects, a Lake Washington development reaches for the sky.
- Clevo Warehouse District Promises Apartments – Cleveland.Com, Nov. 20, 2015 – Between West Third and West Sixth, a pair of developers propose 350+ new downtown apartments.
- St. Louis Apartment Building Closes Development Phase – St. Louis Post-Dispatch, Nov. 18, 2015 – The Highlands At Forest Park enters its final phase with the addition of these 246 units.
The above video featuring local TV news coverage of a greenlighting of an outlet mall project in East Tulsa serves as a modern study in using media to advantage a developer while at the same time informing the community of the terms of an impending commercial project.
I want to avoid commenting on the project or developer in specific. What I’d like to focus upon is the video, looking at the kind of content shown in the TV news segment detailing the impending land purchase and what the folks watching KJRH-TV were being offered.
What catches my eye is the segment’s information-rich presentation: we see the local planning commission’s vote on the project, and are told specifics of the TIF financial support of the project.
It seems to me that to tell this story at this level of detail is to benefit the project and community all at once. Voters and prospective customers are informed substantially of the terms of the subsidy, and are geared up to expect expanded infrastructure in their community as well potential commercial development in an area of need.
While I think it’s reasonable to expect the publicity earned by the news segment to help make the developer’s case in the upcoming city council vote and other hurdles — I’m impressed with the complementary discussion of TIF details. To my eye, this media outcome goes a long way toward getting off on the right foot — positioning the developer as above-board and offering respect to the community they seek to improve.
The transformation of retail business models in the age of e-tailing also forces transformation of retail and warehouse space demands. Allocation of existing retail space as well as acquisition of new space is profoundly affected by today’s omni-channel retail business models that stress flexibility and speed in the delivery of products to customers. Enabled by strong inventory control and order control systems, web sites and mobile applications, omni-channel retailing breaks up the traditional retail traffic patterns into space-sensitive delivery methods:
Drop-shipping: Supposedly a means to limit inventory costs, an order from a website prompts a fulfillment via shipment from one or more 3PL – third party logistics warehouse. Showroom space is entirely virtual in this model, which means it simply isn’t appropriate for every retailer: any segment such as fashion where different deliveries from different vendors within a single order are common, brick and mortar showroom square footage needs will remain.
Click-and-collect: The customer orders online and uses an option to pick up the items at a brick-and-mortar store.
Tripp Eskridge Spells Out Construction
Jones, Lang SVP Tripp Eskridge makes the case clearly for the new vocabulary in construction for omnichannel retail. In his article The Omni-Channel Effect, managing the increasing size of distribution center footprints looms large in the industry’s future.
Combining the two types of distribution strategies into one requires a new type of product and not only in terms of size. The labor-intensive nature of direct-to-customer orders requires a building designed with workers’ needs in mind, in contrast to the automation-oriented design of traditional warehouses. big-box centers must integrate features from both sides of the house and may add some new elements:
- Multiple mezzanine office levels – With two or three mezzanine levels, big-box centers allow workers to access merchandise easily. Plus, the extra office space is needed for ecommerce order packing, gift-wrapping and returns.
- State-of-the-art fire protection – Higher ceiling clearance means sprinklers have more work to do. Fire protection has always been one of the main factors limiting ceiling heights, with the other factor being the stability of racking systems. Ceiling heights of 36 to 40 feet would put yesterday’s fire protection systems to the test, but in recent years, new in-rack sprinkler systems increase the level of protection per square foot.
- Better lighting and HVAC systems – In traditional warehouses employing just a handful of workers, precise calibration of light levels or thermal comfort has not mattered as much as an office environment. Now that big-box centers have more office-type workers, it’s necessary to have heating, cooling and lighting that enables workers to be comfortable and productive.
Get the entire article here at Construction Today: Construction Today – The Omni-Channel Effect.