Commercial Real Estate Roundup For August 3, 2015

Like-kind exchanges get a census, Q2 sales slump, office construction booms in ten markets, an intergovernmental turf war, and what does $12 million get you in Milwaukee? It’s all here at the Commercial Real Estate National News Roundup for August 3, 2015.



  • Sales Growth Slow in Second Quarter – – July 27, 2015 – Is lower volume due to higher CAP rates, concern over potentially rising interest rates or something else?









03. August 2015 by Wayne Grohl
Categories: News | Tags: , , , , , | Leave a comment

Retail Expansion Fueling Demand For New Net Lease Assets

Scattered retail expansion in Q2 of this year continued due to low interest rates and persistent consumer demand. Nationally, retailers continue to expand, re-tool their business models and test new markets. This, according to at least one market researcher, has added up to increasing demand for new-construction net lease assets that are in turn commanding premium prices due to the scarcity of these types of opportunities.

Lanie Rea, director of research for Chicago-based Stan Johnson Company, a firm specialized on single-tenant net lease properties,  says in NREI that the Southeast is currently leading the nation in 4 million sq. ft. of net lease new construction in the pipeline. Apart from the West, the remaining regions are holding strong with an roughly 2.5 to 3.5 million sq. ft coming online.

Cap Rates Staying Low

Cap rates in Q2 of 2015 for single-tenant net least retail have remained unchanged at their historically low rate of 6.4 percent, according to research firm The Boulder Group. The boutique investment real estate firm that specializes in single tenant net lease properties reported that the overall supply of net lease assets was up over 20% in Q2 with retail assets leading all real estate sectors at 23 percent.

Reportedly, some of the rapid retail growth is stemming from drugstores, grocery stores, restaurants and discount stores including Dunkin’ Donuts, Walgreens and Dollar General . According to Crittendon Reseach, Inc., a national analysis and forecasting firm also cited aggressive growth in 2015 especially from retailers such as Dick’s Sporting Goods, Aldi, GNC, Advance Auto Parts and others.

According to industry expert Jonathan Hipp, President and CEO of the Calkain Group and author of  “The Little Book of Triple Net Lease Investing”,  the most active states for net lease activity from Q1 of 2015 were 1. California, 2. North Carolina & tied for 3. Florida/Arizona. The figures for Q2 haven’t been published yet, but based on the flurry of retail growth we’re waiting to see where this upward trend leads.

CCIM reports in their July-August 2015 issue of CIRE magazine that many factors including seller hesitation will help to limit the amount of available inventory in the retail net least market.  See here for their synopsis.


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31. July 2015 by Wayne Grohl
Categories: Retail | Tags: , , | Leave a comment

Retail Comeback In Suburban Sprawl?

While retail’s national economic health picture remains mixed with the commercial real estate recovery applied unevenly across the land, recovery stories are appearing that demonstrate what could yet be for the national retail property market as a whole.

In Yorkville, IL fifty miles west of Chicago stands a 600,000 sq. ft. shopping center named Kendall Marketplace. Kendall is a shadow of the original development plan of 800K sq. ft., a plan that ran into the historic buzzsaw of the 2007-2008 financial crisis.  The development opened amid that chaos, trimming expectations for the intervening years.

The project lies at the extreme edge of suburban metro area, a gamble, ultimately, on sprawl. The trends of recent years leading back toward downtown living interest and development haven’t done Kendall any favors.

But seller representative Jones Lang Lasalle has the immediate surrounding area pegged for 13% growth during the next five years. Which in turn has Kendall’s owners, Greenwood Global Inc, doubling down on suburban lifestyle by buying residential zoned land surrounding Kendall.  Brian J. Rogal writes for Globe St.:

“This is the area that was supposed to be the next to develop,” Alex Berman, founder of the Northbrook, IL-based [Greenwood], tells The center’s developers originally planned to have about 800,000 square feet, but “the sales, while decent, were lower than expected and it wasn’t entirely built. Growth is returning and we will be happy to complete the project, although it may take time.”

Kendall Marketplace currently has about 590,000 square feet, which includes space occupied by shadow anchors Super Target, Home Depot and Kohl’s. Berman’s group bought 192,000 square feet of existing retail space anchored by Dick’s Sporting Goods, Marshalls and PetSmart, in addition to several vacant outparcels and adjacent residential land zoned for 192 single-family homes and townhomes. The price was not disclosed.

“We’re not a residential developer,” Berman adds, “but on the other hand, we think that as the property matures, the retail component will benefit the residential portion and the residential will benefit the retail.” Greenwood may eventually build the homes, or bring in a joint venture partner to help, but regardless of the route it takes, as demand for new housing in the area begins to swell again, Berman believes it’s important for the company to control this land.

Read the entire article here.

30. July 2015 by Wayne Grohl
Categories: Retail | Tags: , , , , | Leave a comment

Commercial Real Estate National News Roundup For July 27, 2015


Seniors, minorities and millenials push multifamily growth, industrial markets looking very healthy, more companies are moving their headquarters to urban centers, Class B housing on the rise for working class families and more. It’s all here at the Commercial Real Estate National News Roundup for July 27, 2015.


  • Economy Watch: 3 Economic Trends Affecting CRE, Commercial Property Executive, July 20, 2015 – Residential and multi-family starts up considerably since last year which should mean the need for more retail and office properties.


  • Suburb-to-City Migration Here to Stay,, July 23, 2015 – Companies who want to stay competitive with a younger urban workforce are abandoning their corporate campuses in the sticks for new downtown digs.


  • Speed Lands Rare Big Box Industrial,, July 21, 2015 – To snag prime space in this tight submarket, lessees must act quickly, negotiate and be able to take occupancy quickly.


  • How Retail Leasing is Changing,, July 21, 2015 – An extremely competitive market means retailers need to be more aggressive, creative and open to more non-prototypical locations and layouts.



27. July 2015 by Wayne Grohl
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BOMA Updates Best Practices For Sustainability Through BEPC Contract Model

The Building Owners and Managers Assocation (BOMA) International has just announced the updated version of their groundbreaking BOMA Energy Performance Contracting (BEPC) Model to incorporate new best practices into building maintenance. BEPC was originally created in 2008 by BOMA International in a partnership with the Clinton Climate Initiative (CCI), several major real estate companies and energy service companies (ESCOs).

BEPC Is Updated For Today’s Best Practices

Unfortunately, since the initiative started in 2008 there was not much market emphasis on retro-fitting buildings with new energy-saving technology during the crisis of ’07-’09.  Now that the market has vastly improved and recovery is well underway,  BOMA is updating and sharing their program more broadly with the commercial real estate world.

A standout for best practice from BPEC: investors are well-advised to be proactive in managing their assets so they can make strategic investments to drive rents and occupancy.  Exhaustive management of utility expenses has become a best practice, but many of the older buildings have infrastructure that is approaching or at the end of its useful life, limiting potential to get a handle on all the utility usage information that true best practice calls for.

Gear To The Ground

You can’t manage what you can’t measure, and when it comes to sustainable ant truly controllable energy usage, that means extra equipment. Technology upgrades will be necessary in order for the buildings to remain competitive in today’s market.  Such refits can be large capital projects tending toward the complex, carrying a variety of risks. However, the risk of doing nothing is very real, causing rising maintenance costs, utility costs, increasing complaints from tenants and potential tenants.  Left unaddressed – especially in a competitive environment, these costs will negatively impact the owner’s bottom line sooner than later.

BOMA International Chair-Elect, Kent C. Gibson, BOMA Fellow, president of Capstone Property Management, LC. was quoted in BOMA’s press release, “BOMA International is pleased to provide building owners with a valuable resource that can help them increase asset value, improve operational efficiency and demonstrate to tenants a commitment to sustainability.”  Among these are investigations into technology applications that will help understand what’s really called for to improve building performance and reap the true benefits.

BEPC Designed To Enhance Performance and Efficiency

The BOMA BEPC was designed to manage risk performance, facilitate projects that enhance building’s performance and efficiency and aid in delivering predictable returns on capital projects. BEPC provides a conceptual framework and supporting template documents to help private building operators develop and execute investment-grade retrofits to enhance the value of their properties. BEPC also provides transparency on performance expectations, pricing and a clear guidelines for managing their retrofit project so that the owners meet their goals and finish their projects within their desired timeline.

Since its beginning, BEPC has facilitated projects in more than twenty cities across five continents. The BEPC Model works with a variety of funding models including ESCO or third party, Property Assessed Clean Energy (PACE) programs and self-financing.

Read all about the BEPC Model from BOMA here.


24. July 2015 by Wayne Grohl
Categories: Green Building | Tags: , , , | Leave a comment

Developers Can Help Build Value Through Transit Value Capture

Stephen E. Schlickman

Stephen Schlickman, Exec. Dir. UTC at UIC

[Guest blogging today is Stephen Schlickman, Executive Director of the Urban Transportation Center at University of Illinois at Chicago.  The relationships between property value and infrastructure are studied exhaustively, and UTC’s specialty is the factor of  transportation infrastructure in the outcome of property value. Today, Steve explores how real estate development can overcome funding challenges for infrastructure projects using a funding technique called “value capture”.  Mr. Schlickman has a law degree from DePaul University and an undergraduate degree from Georgetown University. In 1992, he was named to the prestigious “40 Under 40″ list by Crain’s Chicago Business. -WG]

A reliable, affordable and extensive public transportation system is vital to the continued health and future growth of our nation’s cities.  But some of our largest metro areas face this big challenge:  A significant backlog of underfunded transit capital projects.

Through a process called value capture, the private commercial property industry can play a critical role in funding transit improvements needed to keep cities strong. In turn, properties can grow in value from proximity to a new rapid transit station or other transit development.

Here’s how the process usually works. Municipalities secure partial funding for transit projects through these two forms of value capture:

  • An ongoing tax or fee tied directly to the size and scope of the property. The most common methods are creation of a special assessment district, through tax increment financing or by floor area ratio marketplace factors.
  • A pre-determined financial commitment from the developer, such as a joint development or project cost-sharing agreement.

Last year, a research team from the Urban Transportation Center at the University of Illinois at Chicago completed research into value capture practices in four major U.S. metro cities and produced a report, “Value Capture Coordination:  Case Studies, Best Practices and Recommendations,”

Two key conclusions were drawn: Value capture practices can be successful if municipalities, transit agencies, community groups and developers agree to terms in the initial stages of the development process; and, if all parties support the concept and employ staff skilled in transit planning and funding.

Researchers prepared funding case histories in Chicago, Washington, D.C., New York and San Francisco and found out that the process was employed differently — often dramatically — in each metro area.

For example, in New York, two independent taxing bodies were created to manage funding and planning for the expansion of the Metropolitan Transportation Authority (MTA) Number 7 line subway to serve commuters and residents in Hudson Yards. The neighborhood, located on the west side of Manhattan, has experienced significant commercial, residential, and retail redevelopment in recent years and is close to the Jacob K. Javits Convention Center.  Following negotiations launched in 2005, developers, the city and the MTA finalized three value capture mechanisms – floor area ratio, payments in lieu of property taxes and grants to negate mortgage recording taxes – to fund the $2.3 billion project, now 90% complete.

The process to build the NoMa-Gallaudet U Red Line metro station in Washington took a different, yet successful course.  Years before work began on the station, the District’s Department of Housing and Community Development led coordination between area developers and Action 29, a private civic group. A special taxing district was established and $25 million was raised to fund station construction, which totaled $103.7 million.  Since completion in 2004, there has been $3 billion in private investment near the station.

Public transportation improvements yield many benefits. Better transit can strengthen a business district, give workers greater access to jobs, improve accessibility and increase property values.  Transit value capture offers commercial real estate developers a viable way to enhance their real property assets and improve livability within the community.

23. July 2015 by Wayne Grohl
Categories: Finance | Tags: , , , , | Leave a comment

Commercial Real Estate National News Roundup For July 20, 2015


English: Chicago City Hall Green Roof

Chicago City Hall Green Roof (Photo credit: Wikipedia)


Department of Energy needs your help, options and collaboration remain key in today’s office, brick and mortar retail boom time, multifamily fund surpasses $1 billion and more. It’s all here at the Commercial Real Estate National News Roundup for July 20, 2015.





  • Apple Dips into San Jose Market, Commercial Property Executive, July 13, 2015- Apple joins Silicon Valley market where commercial rentals top $28 a square foot due to technology company expansion.





  • Are We Overheating?,, July 17, 2015 – 250% appreciation in property value since 2009 may be the sign of an overheating Miami real estate market.



20. July 2015 by Wayne Grohl
Categories: News | Tags: , , , , | Leave a comment

Commercial Real Estate National News Roundup July 13, 2015

The good news on the horizon for CRE doesn’t seem to want to stop, the complicated prospects of marijuana legalization, rents up and cap rates down, and here come the German grocers.  It’s all here at the Commercial Real Estate national news roundup for July 13, 2015.



  • The Upward Climb Isn’t Over Yet,, July 10, 2015 – Data on employment, overall consumer confidence, debt ratios and capital flow suggest the US CRE market can move upward and onward for a good long time.









  • Chicago Apartments Sell Like Hot Cakes, Commercial Property Executive, July 6, 2015 – Renovation and high occupancy of Chicagoland apartments will most likely inspire more needed redevelopment.


13. July 2015 by Wayne Grohl
Categories: News | Tags: , , , , | 2 comments

Bell Apartment Fund V Announces $425 Million of Total Equity Commitments


Private equity real estate fund, Bell Partners, Inc. Fund V will invest in quality apartment complexes in highly desirable locations with value-add potential in the Western United States, across the East Coast and in the Southwest.

Bell Partners, Inc. founded in 1977 is now the 11th largest apartment operator and 7th largest apartment renovator in the United States according to the National Multi-Housing Council.

Bell Partners, Inc. has completed their final round of funding for $425 million total equity commitments.  Bell Partners is considered to be one of the highest “top performing, consistent” real estate fund managers for the second year in a row by the 2015 Preqin Global Real Estate Report.

Jon Bell, president of Bell Partners, Inc. said in a press release, “We are very pleased with the reception that Fund V received from domestic and international investors.  The positive investor response to the Fund demonstrates confidence in Bell’s strategy, management team, and vertically integrated operating platform, as well as recognition of our strong track record.  We are confident that this investment opportunity will generate attractive current income and provide strong total returns.”

Since 2002, Bell Partners Inc. has invested $10 billion of apartment investments on behalf of its investors. Bell invests in multifamily properties in targeted areas and some transitioning areas that can through renovation create high-quality communities in supply-constrained submarkets near major employment centers and other amenities.

National Association of Realtors’ latest Commercial Real Estate Outlook offers overall projections for four major commercial sectors: multifamily markets, industrial, retail and office developments. Historic data for several metro areas were provided by REIS, Inc., a source of commercial real estate performance information.


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10. July 2015 by Wayne Grohl
Categories: Multifamily, Property | Tags: , , , | Leave a comment

Making Frivolous Land Use Challenges Tougher To Pull Off

In “The Tyranny of the Abutter” at JDSupra, Boston attorney Robert Ruzzo muses on a way Massachusetts has proposed to streamline and better democratize the process of court challenges to land use.

Land owners have a lot of power when the land is adjacent to a proposed use. In the eyes of the law, this classifies them “abutters” – because their land abuts, or touches the land in question that has the new proposed use. Abutters have an extra say in what goes on in a community by leveraging their legal status as owners, and can challenge a permit for a particular use on abutting property in court.

But is this the best way to express property rights?  Does it place too much power in the hands of landlords who just seek to tie up a competing development for years, hoping that future market shifts will kill the proposal ultimately? That’s the question Russo kicks around in a thoughtful piece that looks at what one state is doing to look at the problem of frivolous challenges to state permitting processes.

Last year, the Massachusetts Housing Partnership (MHP) handed in a legislative proposal that contained an idea that originated with the Mitt Romney gubernatorial administration.  Why not, the proposal goes, establish a three-person permit appeal review council, and have parties submit briefs to the council on the merit of a given permit appeal?  As Ruzzo puts it:

The proposal, while intriguing, is not entirely radical. First, no one actually loses their right to a day in court. The costs of bringing a less than meritorious appeal are simply increased. According to MHP, the concept of screening out “frivolous” medical malpractice lawsuits by using a tribunal has been in play since 1976. The requirement to post a bond in order to bring an appeal is also a part of our existing Smart Growth law (Chapter 40R). Moreover, Massachusetts has for a number of years countenanced the notion that certain litigation may be against public policy.

The discussion of a review panel to pre-screen abutter appeals should continue. A few observations: (a) the composition of the panel should continue to be examined; (b) an exemption for neighboring municipalities is warranted; and (c) the proposal should have a built in reporting mechanism which would track the ultimate disposition (or non-pursuit) of the appeals that come before it. It will be essential to know and closely monitor the panel’s track record. If appeals subjected to a bonding requirement are ultimately successful on the merits in great numbers, the legislation would need to be revisited.

Obviously, one party’s frivolity could easily be another party’s diligence — and when a conflict of substance arises in land use, we always have the courts, expensive and lengthy as they tend to be, to settle such questions. In the end, it is true that the right to develop property needs protection — or at least a second look — given by local civic structures who can best make a determination on wether to err on the side of NIMBY concerns or not.

09. July 2015 by Wayne Grohl
Categories: Government | Tags: , , , , , , , , | Leave a comment

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