Hartman Simons Commercial Real Estate Blog

The Wednesday Wrap: May 22, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “At ICSC, New Concepts, New Approaches” by Natalie Dolce of GlobeSt.com.

GlobeSt.com is covering the events at ICSC RECon 2013 in Las Vegas this week, reporting on the trends that retail industry executives are discussing at the conference.

Financing for retail projects continues to improve as the economy improves, even in secondary and tertiary markets, Patrick Crandall of C&W told GlobeSt.com during his firm’s reception. 

Gary Mozer of George Smith Partners told the outlet that lenders are looking past “quantitative basics” when determining whether to finance an asset.

“Today, lenders are much more focused on the longevity of the asset’s income stream and are delving deeper into the long-term viability of a retail property’s tenants,” Mozer said.

A running theme throughout many RECon discussions has been brick-and-mortar retail’s resilience over Internet shopping, Dolce reports. Retail centers that offer a “human experience” that can’t be replicated online will do well, said Craig Killman of Jones Lang LaSalle.

• “Retail Development Back on the Horizon” by Elaine Misonzhnik of National Real Estate Investor.

As the retail real estate market continues to improve, industry players are beginning to conceive new projects, Elaine Misonzhnik reports from RECon.

Publicly traded REITs like Taubman Centers and Regency Centers are in the planning stages for new centers. These new centers will most likely be in urban markets with smaller footprints, Misonzhnik reports.

Even smaller regional developers have been thinking about new projects that could start within the next few years, according to Misonzhnik.

• “Retail Rent Growth Finally Takes Root Across U.S. Metros” by Randyl Drummer of CoStar.

Quoted asking rents are finally rising across all retail property types for the first time since 2008, according to CoStar’s “First Quarter 2013 Retail Review and Outlook.”

This growth is a result of more than two years of recovery in the sector’s operating fundamentals, according to CoStar real estate economist Ryan McCullough.

CoStar expects retail construction to increase some in 2013. Outlet centers are the first wave of new development, with six centers across the country under construction and about another dozen in planning, Drummer reports.

• “Restaurants, Luxury Tenants Are Once Again in Expansion Mode” by Elaine Misonzhnik of National Real Estate Investor.

The retail real estate market is gaining traction, but leasing activity and aggressive expansion are still more prevalent in larger, urban markets, according to leasing executives attending RECon.

Restaurants, luxury retailers and apparel sellers have been among the most active tenants at high-end retail sites in metro New York, Francis X. Scire Jr. of Simon Property Group told Misonzhnik.

Kemper Development reports lots of interest from high-end retailers like Tesla Motors, Microsoft and Apple, at The Bellevue Collection, the firm’s Class-A property in Bellevue, Wash.

But for retail properties in many secondary and tertiary markets, conditions aren’t as favorable. Some shopping centers built during the boom in markets like Atlanta will have to be redeveloped for other uses, according to Scott Prigge of Regency Centers.

• “Construction Picks Up across South, Metro Atlanta” by Douglas Sams of the Atlanta Business Chronicle.

The southern region of the United States — stretching from Texas to Georgia and up to the Carolinas — has a construction backlog of 9.3 months, the longest backlog of any U.S. region, according to recent data from the Associated Builders and Contractors.

The backlog gauges construction work that will be performed by industrial and commercial contractors in the coming months, Sams reports.

Atlanta has seen construction demand pick up in the housing, retail and industrial sectors, Sams reports. The new Falcons stadium slated for Atlanta could be a major catalyst for new development in the city’s downtown core, he adds.

Kilberg and Rothschild Discuss Outlet Center Leases in Value Retail News

The May 2013 issue of Value Retail News features a guest column by Lori Kilberg and Benno Rothschild in which the Hartman Simons partners detail the five outlet-center lease provisions that landlords and tenants should pay especially close attention to. In the piece, titled "The Fab Five: Outlet Clauses to Live By," Kilberg and Rothschild discuss use provisions, operating covenants, radius restrictions, co-tenancy provisions and early termination rights.

Click on the following link to view Kilberg's and Rothschild's column on outlet center leases. The column has been reprinted and shared with permission from Value Retail News.

 

Retail Real Estate Continues to Gather Momentum

Simons

With many major chains opening new stores and investors showing strong interest in retail properties, the retail real estate sector is set to continue its recovery in the second half of 2013.

That’s the take of Hartman Simons, which represents tenants and landlords in retail leases as well as investors in retail properties. The firm provided its analysis as the 2013 ICSC RECon convention got underway in Las Vegas. The retail real estate convention runs from May 19 through May 22.

Retail investment sales “have been blistering,” said Bob Simons, a partner with the firm. “Leasing has been picking up too. Our work in those areas is up significantly over last year and dramatically from 2009 and 2010.”

“We are very optimistic about the rest of this year,” Simons added. “I think investment sales could become even more competitive.”

REITs and institutional investors are in hot pursuit of core assets, such as grocery-anchored shopping centers, in major urban markets, and the capitalization rates for the sales of those properties have compressed to 2007 levels, Simons said. Meanwhile, individual and pension-fund investors, in search of higher yields than the miniscule returns offered by Treasury bonds, have been gobbling up single-tenant, net-lease retail properties, such as drug stores and banks, across the country, he said.

The sector is experiencing the expansion of several major retailers, Simons said. Sporting-good chains and specialty grocers are among those expanding aggressively, Simons said.

Unfortunately, financing can still be difficult to obtain for smaller retailers. “Mom-and-pop tenants and local retailers are still struggling for access to capital,” Simons said.

The Wednesday Wrap: May 15, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Malls, Self-Storage Led REITs in First Quarter” by A.D. Pruitt of The Wall Street Journal.

The performance of real estate investment trusts (REITs) exceeded analysts’ expectations in many cases during the first quarter, and REITs focusing on luxury shopping malls and self-storage facilities saw the largest gains, Pruitt reports.

Upscale malls and outlet centers that appeal to a wide range of shoppers haven’t been significantly impacted by online competition, according to Alexander Goldfarb, an analyst with Sandler O’Neill + Partners.

Additionally, self-storage REITs have performed strongly because of rising rents and strong tenant demand, Pruitt notes.

Office and apartment landlords continued to see earnings growth, but at a slower pace than in past quarters because of lackluster employment growth and increased competition, Pruitt reports.

• “Property Values Hovering Around Market Peaks” by Carisa Chappell of REIT.com.

“Five years after the onset of the global financial crisis, bellwether pricing indices indicate that commercial property values appear to have reached — if not surpassed — the market peaks of 2007,” Chappell writes.

According to the Green Street Advisors’ Commercial Property Price Index, commercial property values increased 1 percent in April, putting them above 2007 levels.

Another index showed that the unlevered property values of REIT-owned properties nationwide were almost even at the end of April with their January 2007 levels, Chappell reports.

• “Colliers: Shopping Centers’ National Vacancy Rate Down in Q1” by Marianne Wilson of Chain Store Age.

Shopping centers absorbed nearly 4.5 million square feet in the first quarter, causing the national vacancy rate to drop ever so slightly, from 10.09 percent to 10.06 percent, according to Colliers International’s “2013 Q1 North American Retail Highlights” report.

As the housing and job markets improve, consumers’ confidence is rising, and they’re spending more, the report notes. The six North American markets with the most shopping center leasing activity are also cities that are experiencing significant long-term employment growth and strengthening housing markets, according to the report.  

• “Expect Fed Decisions to Impact Lodging” by John Salustri of GlobeSt.com.

The Lodging Industry Investment Council’s annual member survey shows concern over the impact that sequestration and Obamacare will have on the market. 

Sequestration is “anticipated to negatively impact hotel owners,” the report says. “Fifty-five percent believe that the current government sequestration will cause ADR to decrease 1 percent to 5 percent in markets that rely heavily on government spending.”

Increased labor costs stemming from the new federal healthcare law and the sluggish economy are also expected to affect the industry, Salustri reports.

• “Running to Stand Still: The Office Sector Sees Marginal Improvements” by Brad Doremus and Victor Calanog of National Real Estate Investor. 

With sluggish job growth leading to equally sluggish growth in demand for office space, the national office vacancy rate declined just 10 basis points during the first quarter to 17 percent — the exact amount it declined in the prior quarter, Doremus and Calanog report. More expansive job growth would have a dramatic impact on the rate “since supply additions are virtually nil,” they add.

Asking and effective rents grew by 0.7 percent during the first quarter. “Despite 10 consecutive quarters of rent increases, rent levels are still anchored at benchmarks last observed in late 2007,” Doremus and Calanog report.

Still, tech- and energy-heavy markets are outperforming the national average in terms of asking and effective rent growth, Doremus and Calanog note.

The Wednesday Wrap: May 8, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Health-Care Owners Shun Nursing Homes” by A.D. Pruitt of The Wall Street Journal.

Some of the largest owners of healthcare facilities are scaling back their investments in nursing homes because of their growing concerns that the homes will be less profitable in the face of steep Medicare and Medicaid cuts, Pruitt reports.

Ventas Inc. has said it will won’t make any major new acquisitions until the effects of the cuts become clear, while others, like Health Care REIT Inc., say they might exit the sector altogether, Pruitt reports. 

A number of states are reducing Medicaid reimbursement payments to nursing homes, and the federal government cut Medicare rates by 2 percent on April 1 as part of the sequestration, Pruitt notes.

Other firms say they aren’t concerned about possible sequester-induced cuts and that the market risk is overstated, Pruitt reports.

• “Office Demand Still Catching Up With Job, Business Growth” by Randyl Drummer of CoStar.

Modest job growth has prevented a dramatic increase in demand for U.S. office space, and therefore rents have remained at relatively low levels, Drummer reports.

Average office employment is growing at a rate of just more than 2 percent, while demand for space is growing at just half that rate, according to CoStar Group’s First-Quarter 2013 Office Review and Outlook.

In the first quarter, the national office vacancy rate declined 10 basis points to 12.2 percent. The post-recession high was 13.5 percent, according to Drummer.

• “Samsung Opening 1,400 Mini-Shops inside Best Buy Stores across U.S.” by Salvador Rodriquez of The Los Angeles Times. 

Samsung is planning to open hundreds of mini-shops across the country inside Best Buy big-box locations, Rodriquez reports.

The electronics giant already has opened a couple of the shops and hopes to have 900 of them up and running by the end of May and 500 more shortly after, according to Rodriquez. 

Samsung considered opening its own retail locations, but found that partnering with Best Buy would allow it to open the stores more quickly, Ketrina Dunagan, Samsung’s vice president of retail and channel marketing, told Rodriquez. 

• “Miami’s Condo Market Rebounds, Stoking a Building Boom” by Terry Pristin of The New York Times.

Because of the demand of Latin American investors, only about 600 of the 22,000 condos created in downtown Miami during the pre-recession era are still on the market, Pristin reports. Now, developers are building more units, he adds. 

In February, home values rose by 10.4 percent in Miami versus a year ago, while national home prices jumped 9.3 percent, Pristin notes. 

Miami officials are encouraging condo developers to provide easy access to public transportation, street-level retail and underground parking, Pristin reports.

• VIDEO: “Quick Study: REITs Beat Market in April” by Allen Kenney of REIT.com.

In this clip, NAREIT Editorial Director Allen Kenney and Senior Vice President of Research and Industry Information Brad Case discuss the REIT market’s performance in April.

The two discuss how the REIT market performed in relation to the rest of the stock market and which sectors stood out for their performances.

Four on Friday: Bob Simons Judges Mock Negotiations at ICSC Atlanta Next Generation Event

Negotiations (and some local brews) were on the agenda this past Tuesday evening when Hartman Simons partner Bob Simons judged a series of mock negotiations at the ICSC Atlanta Next Generation’s “Fight or Flight - Mock Negotiations” event at the Red Brick Brewery.

The evening featured three “bouts” of mock negotiations. Two of the bouts pitted a landlord against a tenant; the third bout featured a project manager against a general contractor.

Hartman Simons partner Ryan Rivera is a member of the Atlanta Next Generation Program Planning Committee. “We work hard to plan events that broaden the skills and perspective of our members, and Tuesday’s event at the Red Brick Brewery was a great chance for the attendees to learn more about the crucial skill of negotiating,” Rivera said. “Bob provided some very valuable insight and feedback, and I know our Next Generation members learned a lot.”

For today’s Four on Friday, we present four photos from Tuesday’s event:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Wednesday Wrap: May 1, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Retail Real Estate Cheer Momentum for Online Sales Tax On Capitol Hill” by Randyl Drummer of CoStar.

Many of those in the retail real estate industry see the advancement of the Marketplace Fairness Act of 2013 as a critical step in equalizing the battle for shopping dollars between bricks-and-mortar stores and online retailers, Drummer reports. 

Last week, the U.S. Senate approved a procedural measure to allow debate to move forward on the legislation. If passed, it would allow states to require Internet retailers with $1 million or more in annual out-of-state sales to collect sales taxes for the state and local governments of the buyers, Drummer reports.

“Why should online retailers be able to take advantage of a tax-free situation?” Greg Maloney, president and CEO at Jones Lang LaSalle Retail, told CoStar.

• “Entertainment Tenants Can’t Save All the Struggling Retail Centers” by Elaine Misonzhnik of National Real Estate Investor. 

As online retailers drive sales away from traditional big-box chains, retail landlords are increasingly looking at entertainment and restaurant tenants to fill vacant space left by closed large-format retailers, Misonzhnik reports.

Landlords are looking for tenants with natural protection against online competition, such as the growing number of dine-in movie theatre chains. These non-traditional tenants offer an experience that landlords say can’t be duplicated online, Misonzhnik reports. 

Movie theaters aren’t expanding rapidly enough to fill holes in every struggling shopping center, however, and a movie theater isn’t enough to make or break a center, Misonzhnik notes.

• “DLA Piper: Executives Feeling Bullish” by Brian J. Rogal of GlobeSt.

Eighty-five percent of the nearly 200 top executives surveyed in April by DLA Piper feel bullish about the real estate market, according to the law firm’s 2013 State of the Market survey. The firm’s previous survey in October 2011 found only 30 percent felt optimistic, Rogal reports.

Although the economy has been slow to recover, executives seem to be encouraged by easier access to capital, according to DLA Piper.

In contrast to the 2011 survey, respondents now see healthcare facilities as the most attractive investment, in part because of the growth of the sector under Obamacare, according to the survey.

• “Home Prices Score Highest Annual Gain Since 2006” by Nick Timiraos of The Wall Street Journal.  

Home prices rose 9.3 percent in February from a year ago, the largest growth rate in nearly seven years, according to Standard & Poor’s/Case-Shiller’s home-price index report.

The index tracks 20 cities across the United States, all of which posted an increase in prices versus one year ago for the second straight month.

The rise in prices was driven by sharp drops in the number of homes listed for sale and the growing demand for home purchases, Timiraos reports.

Atlanta’s prices rose 16.5 percent, the largest increase in that market in the 21-year history of the Case-Shiller series. Prices were up 23 percent in Phoenix, 18.9 percent in San Francisco and 17.6 percent in Las Vegas, Timiraos notes.

• “Private Real Estate Fundraising Declines to 10-Year Low in First Quarter” by Carisa Chappell of REIT.com.

Fundraising for private real estate investment reached its lowest level in 10 years in the first quarter of 2013, according to data from the research firm Preqin.

Private equity funds raised $5.2 billion in the first quarter, the lowest quarterly total since third quarter 2003. This compares to the $22.6 billion raise in fourth quarter 2012, according to the firm. 

Funds with a primary focus on North America raised the most capital in first quarter 2013, Chappell notes.

Four on Friday: Jesse Tron of ICSC on RECon 2013

We’re only a month away from the International Council of Shopping Centers’ (ICSC) annual RECon convention in Las Vegas (and from Hartman Simons’ annual show party). Therefore, we thought it was an ideal time to pose four questions to Jesse Tron, manager of communications and media relations at ICSC, about this year’s show. A big thanks to Jesse for his time.

Tron

For many reasons – the fading effects of the Great Recession and the growing presence of e-commerce, to name just two – this is a very interesting time for the retail real estate industry. What are some of the key issues and trends addressed by this year’s RECon educational sessions?

 

Tron: The retail landscape has changed. Varying store space requirements, new leasing strategies, diversification in the tenant mix and multi-channel consumer touch points all have changed the way the shopping center industry operates. A new retail reality is certainly upon us, and this year’s RECon sessions are designed to help attendees navigate this changing retail landscape.

Tell us a little about the show's lineup of keynote speakers. Is there one that you are particularly excited about hearing?

Tron: We have three unique keynote speakers this year. On Sunday, May 19, Steven Levitt, the best-selling author of “Freakonomics” and “SuperFreakonomics,” will use his counter-intuitive style to provide insights on problem solving that can be applied to everyday business situations.

On Monday, May 20, Randi Zuckerberg, the former head of marketing at Facebook and now the founder and CEO of Zuckerberg Media, will give a keynote address titled “A Day in the Life of the Modern Consumer.” You can also swing by the #iTechLounge in the Marketplace Mall to meet Randi after her talk. Also, Gregory Wasson, president and CEO of Walgreens, will address attendees on Tuesday, May 21, with a look at how the drugstore business in the U.S. is changing.

Personally, I am excited to hear Steven Levitt since I have read “Freakonomics” (and plan to read “SuperFreakonomics”) and think that his concepts are rather unique. I’m interested to hear how some of them can be applied to the retail sector.

What are some of the new show features planned for RECon 2013?

Tron: You’ll want to make sure you stop by the brand new Retailer Square, which will consist of 21 retailers in a single area of the South Hall Lower Level. Also, back for its second year is the Marketplace Mall, the exclusive home of product and service providers at RECon. The Marketplace Mall is the only show floor open on Sunday, and will give attendees a chance to check out the latest innovations and solutions that can help improve profitability for shopping centers and retailers.

Located in the Marketplace Mall and the Central Hall will be the brand new #iTechLounge, a place where emerging tech trends – from social media to mobile marketing to SEO – will be discussed and examined. Whether you are taking your first steps into creating an online marketing strategy, are interested in emerging trends or are looking for ways to integrate digital platforms, the #iTechLounge will have a session for you.

How many attendees and exhibitors are you expecting this year, and how do those numbers compare to 2012?

Tron: Attendance is running ahead of last year at this time by about 1,000 people, so we are planning to have between 33,000 and 35,000 attendees this year. We again plan to have nearly 1,000 exhibitors, similar to last year.

(To download the RECon 2013 program, click here.)

 

The Wednesday Wrap: April 17, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Economists Expect Continued Improvement in Commercial Real Estate” by Carisa Chappell of REIT.com.

Commercial real estate industry fundamentals are expected to improve significantly over the next few years, according to respondents in the Urban Land Institute/Ernst & Young Real Estate Consensus Forecast for April 2013.

Equity REITs are projected to post double-digit returns in 2013 and 2014, according to the semi-annual survey.

The foundation for the projected improvement is the expectation that GDP growth will re-accelerate to 3 percent or more in 2014 and 2015 and that the unemployment rate will decline steadily to 6.5 percent in 2015, according to survey contributor and NAREIT vice president Calvin Schnure. 

• “Tax Plan May Provide Boost" by Sarah Krouse of The Wall Street Journal.

As part of his budget proposal, President Obama has proposed changes to the Foreign Investment in Real Property Tax Act (Firpta) that would exempt foreign pension funds from paying taxes on gains in real-estate sales, Krouse reports.

It’s a move the U.S. real-estate industry has been seeking for years and one that would likely lead to more U.S. investments by foreign pension funds, according to Krouse.

However, Congress still has to approve the proposed exemption. As part of a larger package of incentives for infrastructure investment, it would cost $2.2 billion over the next 10 years, according to the 2014 budget.

The move is showing for the first time that the White House understands the impact of Firpta, Jim Fetgatter, chief executive of the Association of Foreign Investors in Real Estate, told The Wall Street Journal.

• “Tied to the Mall, J.C. Penney and Macy’s Need Each Other” by Diane Brady of Bloomberg Businessweek.

As Macy’s and J.C. Penney battle it out in court over their respective deals with Martha Stewart’s retail line, the lawsuit is indicative of the idea that although the two retailers are competitors, they need each other to survive, Brady reports.

The two chains are under the same roof in some 400 malls nationwide, and as anchor tenants, they drive foot traffic to each other. Almost half of Macy’s stores are in malls with a J.C. Penney’s store. A drop in traffic to one store could curb sales throughout an entire mall, Brady notes.

• “Hotels Find Partner in Retail Space” by Hotel Management.

The hotel industry is revisiting the pre-recession trend of building hotels as part of mixed-use developments and master-planned urban lifestyle centers, Hotel Management reports.

Recent examples of the trend include the 140-room Cambria Suites at Rockville Town Center in Rockville, Md., and the 300-room Hyatt Regency at Tysons Corner Center in McLean, Va., both of which broke ground last year, Hotel Management reports.

Successful hotel-retail combinations involve large regional shopping centers that provide a sense of “destination,” according to Jim Butler, founding partner of Jeffer Mangels Butler & Mitchell, which worked on the Tysons Corner Center project.

• VIDEO: “Disappointing Jobs Report At Odds With Other Indicators” from REIT.com.

In this clip, Matt Brechard of REIT.com sits down with Calvin Schnure, NAREIT’s vice president of research and industry information, to discuss the most recent jobs report and its impact on commercial real estate. Schnure also examines the varying reports coming out on the overall economy’s recovery.

The Wednesday Wrap: April 10, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Caribou Coffee to Close 80 Underperforming Stores” by The Associated Press (AP).

Caribou Coffee announced Monday it will close 80 underperforming stores and convert another 88 sites to Peet’s Coffee & Tea stores, the AP reports. 

The Minneapolis-based coffee company did not say which stores it would close, but the conversions will occur in the District of Columbia, Georgia, Illinois, Maryland, Michigan, Ohio, Pennsylvania, Virginia and Wisconsin over the next 12 to 18 months, according to the AP.

German investment firm Joh. A Benckiser Group GmbH holds a majority stake in both Caribou and Peet’s, the AP reports.  

• “Uncertainty, Cutbacks Create Tenant’s Market in D.C.” by Robert Carr of National Real Estate Investor. 

Government cutbacks have cooled office leasing in Washington, and tenants now have the upper hand in the city, Carr reports.

The slowdown is a direct result of uncertainty over the federal budget, John Germano with CBRE told National Real Estate Investor.

The Office of Management and Budget has frozen its leasing activity and is requiring other federal tenants to reduce occupancy over the next three years, Carr reports.

Even so, buyers still outnumber sellers of office buildings in D.C., and development is showing up in choice markets, Carr notes.

• “J.C. Penney’s Post-Johnson Options Seen to Include Sale” by Matt Townsend and Jeff Green of Bloomberg.

After hiring Ron Johnson from Apple as its new CEO only a short time ago, J.C. Penney Co. has voted to replace him with his predecessor, Myron Ullman, Townsend and Green report.

Ullman must now decide whether to continue with Johnson’s strategy to turn the chain into a collection of boutiques or return to the more traditional department-store model. The chain was so damaged under Johnson that Ullman will struggle to turn it around, the writers note. 

Because J.C. Penney has the industry’s highest ratio of net debt to market value, a traditional leveraged buyout is unlikely, according to Morningstar.

• “Businesses Stay Cautious About Renting Office Space” by Eliot Brown of The Wall Street Journal.

Occupied office space grew by just 0.12 percent in the United States in the first quarter, reflecting continued caution about the economic recovery, Brown reports.

Asking rents increased 0.7 percent to $28.66 a square foot during the first three months of 2013, while the office vacancy rate fell from 17.1 percent to 17 percent, a mark that is still significantly higher than the 12.5 percent recorded at the office market’s 2007 peak, Brown reports.

Cities with strong technology and energy sectors saw the strongest office markets in the first quarter. These include Dallas, Houston, New York, San Francisco and San Jose, Calif.

• VIDEO: “More Private Real Estate to End Up in Public Hands” from REIT.com.

In this clip, Matt Bechard of REIT.com sits down with Sandy Presant, chairman of the global real estate fund practice group at the Greenberg Traurig law firm, to discuss the chances of large, privately held portfolios of real estate entering the public markets.

Four on Friday: Bisnow's Atlanta Retail Real Estate Summit

Last week, Bob Simons, Hartman Simons partner, moderated Bisnow’s Third Annual Atlanta Retail Real Estate Summit, which provided an in-depth look at Atlanta’s improving retail market. Panelists included David Birnbrey, chairman and CFO of The Shopping Center Group, LLC; Margaret Caldwell, managing director of Jones Lang LaSalle’s Capital Markets Group; Jim Carlson, project manager at Phillips Edison & Co.; Angelo Carusi, principal at Cooper Carry; Jeannie Cave, vice president of real estate for Aaron’s Inc.; and Charlie Heard, vice president of development at Sembler Development. 

In today’s Four on Friday, we highlight four observations made during the hour-long discussion.

• Capital Not Yet Plentiful for Small Businesses. While lenders are wading back into the retail arena, they have yet to begin loaning to smaller retailers, a dynamic that is holding the sector back, Heard noted. Getting lenders to loosen the flow of capital to more mom-and-pop-sized firms “would be a game changer,” he said. 

“That market does need to free up,” Simons added.

• New-Look Stores and Centers. As the impact of e-commerce continues to grow, retailers are likely to have sites that are part standard store and part distribution center, Birnbrey predicted.

Merchants also are working harder than ever to create in-store atmospheres that will lure consumers away from their smartphones and computer screens, and into stores, Carusi noted. “We’re seeing more of a focus on creating and embellishing the experiences that shoppers have,” he said.

During both the downturn and the proceeding slow recovery, landlords also have turned to non-traditional tenants, such as urgent-care facilities and dental clinics, to fill space in their retail centers, Birnbrey added.

• Multiple Bidders. Unlike just a couple of years ago, when retail properties – particularly grocery-anchored shopping centers and Class-A malls – hit the market, owners are receiving multiple quality bids, sometimes as many as six or seven, Caldwell said. “We’re getting back to the days of 2006,” she said, adding that the active transaction market should continue for a while. “I don’t see it slowing down.”

• Construction Costs Still High. Even though the retail sector has performed sluggishly the past few years, construction costs have not dipped correspondingly, Heard said. “Costs of construction have not come down but revenues have. Costs somehow need to come down … tenants can only pay so much. To me, that’s the big disconnect.”

For more coverage of the Retail Summit, read these editions of Real Estate Bisnow Atlanta:

• April 3, 2013

• March 28, 2013

The Wednesday Wrap: April 3, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Office Confidence Stalls with Lack of Rent Growth” by Carisa Chappell of REIT.com.

Investors are concerned over a lack of rent growth in the office sector, according to a commercial real estate report from PricewaterhouseCoopers (PwC).

Absorption levels and rent growth in the office sector are falling short of buyers’ expectations in many markets and therefore pricing remains steep, according to the report.

Even so, PwC partner Mitch Roschelle said the market is showing signs of improvement, noting demand is starting to creep back into the market as 200,000 new jobs have been added to the economy in the last two months.

Roschelle said the suburban market could show promise for the office sector as the single-family home market improves. 

• “Whole Foods Builds Greenhouse on Store Roof” from Supermarket News.

A rooftop greenhouse at a Brooklyn Whole Foods Market will soon supply fresh produce to locations of the chain throughout the city, Supermarket News reports.

Gotham Greens will design, build and operate a 20,000-square-foot hydroponic greenhouse on top of Whole Foods’ Brooklyn store, which the retailer claims will be the nation’s first commercial-scale greenhouse farm integrated within a retail grocery store.

The greenhouse will enable Whole Foods to sell premium, pesticide-free produce year-round, according to Supermarket News.

• “Macy’s Rethinks Distinction between Clicks and Bricks” by Mark Heschmeyer of CoStar.

Reports of the imminent demise of bricks-and-mortar stores at the hands of online stores may have been exaggerated. A recent survey from the Cisco Internet Business Solutions Group found that 93 percent of products sold in the United States are still bought in bricks-and-mortar locations.

This has retailers such as Macy’s thinking about how the store-based and online shopping experiences can be integrated rather than competing against each other, Heschmeyer reports.

“The way we’re looking at it is sort of the total, and how do we transform our stores to be relevant in a world with all this technology available to her?” said Macy’s CFO Karen M. Hoguet. “I’m not as fixated on the Internet versus bricks-and-mortar. And in fact, this year, we’re not reporting it separately anymore.”

• “Hines Gets Green Light on 100 Northpark” by Amy Wenk of the Atlanta Business Chronicle.

The Atlanta Regional Commission has approved a massive mixed-use project planned at Georgia 400 and Abernathy Road in metro Atlanta, Wenk reports. 

The more than $500 million project is planned to include 1.5 million square feet of office space, 150,000 square feet of retail, 500 units for multifamily development and a 250-room hotel, Wenk reports.

The project still needs approval from the city of Sandy Springs, Wenk notes.

• “Ground Officially Broken On West Coast’s Tallest Office Tower” by Randyl Drummer of CoStar.

Boston Properties and Hines have broken ground on the Transbay Transit Tower, a planned 1,070-foot skyscraper in downtown San Francisco that is expected to be the tallest building on the West Coast, Drummer reports. 

The groundbreaking ceremony came the day after the two firms closed on a $192 million acquisition of the land downtown, Drummer notes. The office tower is set to be completed in 2016, just before the opening of a new transit facility.

“The Transbay Transit Tower and neighboring Transbay Transit Center are powerful individual buildings designed with a common civic purpose — to create the 21st century gateway to San Francisco and state-of-the-art place marker on its skyline,” said Fred Clarke, senior principal of Pelli Clarke Pelli Architects, which was awarded the tower and the transit center contract.

The Wednesday Wrap: March 27, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Sporting Gun Stores Aim for Steady Growth with Little Contraction” by Mark Heschmeyer of CoStar.

Strong gun sales over the past few years have driven specialty retailers to expand and other retailers to devote more square footage in their stores to firearms, Heschmeyer reports.

In some cases, specialty retailers like Cabela’s, Big 5 Sporting Goods and Gander Mountain have been able to fill vacant space left by big box stores, Heschmeyer notes.

Big 5 Sporting Goods opened eight stores across the western part of the country last year, ending 2012 with 414 stores. In 2012, Gander Mountain opened eight new stores, mostly in the Southeast, bringing its total to 120 stores nationwide, Heschmeyer reports.  

Recent events have brought increased debate over gun control, but also have driven gun sales as enthusiasts react to potential stricter purchase regulations, Heschmeyer reports. These high sales have made forecasting future sales challenging, according to the retailers.

• “Mixing Bricks with Clicks” from The Economist.

Online retailers are increasingly looking to be “multichannel” by bringing their products to brick-and-mortar stores, The Economist reports.

One example is Kiddicare, an Internet-based retailer of baby products, which has expanded to physical stores because parents often like to handle the products, such as car seats, before buying them, The Economist reports.

For products that don’t need to be displayed in a showroom, online retailers have the advantage. They get to forego the costs of a physical store, but often spend more in advertising to have their digital storefront seen, The Economist notes.

Online retailers are now aiming for the benefits of physical stores without all of the added costs, experimenting with small-concept stores and pop-up shops, The Economist reports.

• “Study Finds Mixed-Use Areas Safer Than Commercial Only” by Emily Badger of Urban Land.

Mixed-use communities have lower crime rates than commercial-only areas, according to a new study published in the University of Pennsylvania Law Review.

Commercial-only areas had crime rates 45 percent higher than similar blocks that included residences, according to the report.

Some say this is because people take more ownership over an area where they both work and live over an area where they would only go to work or shop, Badger reports.

Others say mixed-use communities offer more “eyes on the street” because they have traffic at more times throughout the day, Badger notes. 

• “Micro-Apartments in the Big City: A Trend Builds” by Venessa Wong of Bloomberg Businessweek.

A growing number of single-person households has urban planners experimenting with micro-apartments in North American cities, Wong reports.

Single-person households made up 26.7 percent of the U.S. total in 2010 versus 17.6 percent in 1970, according to Census Bureau data.

Some areas, like San Francisco and Boston, are waiving zoning regulations to allow for smaller apartments, Wong reports. 

“In the foreseeable future, this trend will continue,” Avi Friedman, a professor at McGill University’s School of Architecture, told Bloomberg, noting that more people are opting to live alone and North Americans are learning to live with less space.

• “Net Zero Energy: Making Green Look Passe” by Robert Carr of the National Real Estate Investor.

Buildings that not only reduce energy consumption but also produce enough to offset that consumption, termed “net-zero buildings,” are gaining traction, Carr reports.  

These buildings maximize green features such as natural lighting and efficient HVAC systems while also usually incorporating one or more energy generators like solar panels or fuel cells, Carr reports.

Firms experimenting with net-zero buildings are often choosing warmer climates because there won’t be spikes of energy use that are seen in colder areas. California has been the choice of firms like Hines and HGA Architects and Engineers for their net-zero sites, Carr reports.

Four on Friday: Stephen LaMastra of Monarch Investments

Stephen LaMastra is a managing principal of Monarch Investments LLC. In this edition of Four on Friday, we chat with him about his firm, the current state of the retail sector in the Southeast and how the sector should perform in the year ahead. Many thanks to Stephen for his time.

HS: Give us an overview of Monarch Investments.

LaMastra: Monarch Investments Group is an Atlanta-based commercial real estate investment firm engaged in the acquisition and management of retail properties. Monarch focuses on retail centers in markets throughout the southeastern United States and especially on unique opportunities, turnaround situations or value-add properties. 

Monarch is in the process of expanding its current portfolio of properties to more than $150 million over the next two years. Monarch seeks properties valued between $4 and $20 million, and portfolios of larger size, from coast to coast. 

HS: What kinds of retail properties are performing well in the Southeast and what kinds continue to struggle? 

LaMastra: While retail is clearly on the mend, and progress should be steady over the next few years, most of the recent improvements in occupancy and rental rates have been limited to the highest-quality assets, in particular top-tier grocery-anchored centers and uniquely positioned community and regional centers. There continues to be a disconnect between bid and ask in the other classes of retail properties, both in terms of purchase and sale and leasing efforts. We expect that to continue through 2013 and into next year.

HS: Do you believe the next 12 months will bring dramatic improvement to the retail sector, modest improvement or no improvement?

LaMastra: Yes, there will be continued and steady progress over the next 12 months, and we also expect the band of improvement – in terms of asset class and retail category – to widen beyond its current narrow focus.

HS: Commercial real estate can be a demanding business: What do you do to relax and recharge your batteries? 

LaMastra: Primarily time with family and friends, cycling and sports, and a fair amount of travel, both for business and pleasure.

The Wednesday Wrap: March 20, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Investors Wary of Power Centers, Recommend Hold on All Retail Assets” by Retail Traffic.

Institutional investors are skittish about buying power centers, probably because of the associated lease-up risks, according to the Winter 2013 report from the Real Estate Research Corp. (RERC).

Investors surveyed in fourth-quarter 2012 required average pre-tax yields of 7.3 percent to 9.5 percent for power center properties, while required yields for all retail properties averaged 8 percent. The average going-in cap rate for all retail assets was 6.7 percent, according to the report.

The majority of surveyed investors also recommended holding retail properties rather than selling them, according to the report.

• “Retailers Diverting More Real Estate Dollars to IT” by Mark Heschmeyer of CoStar.

The days of rapid expansion for many retailers are now over, and the money once used for real estate is being diverted to other aspects of business, like technology, Heschmeyer reports. 

One example is Kohl’s, which recently announced that it has opened nine new stores and plans to open just three more this year, down from last year when it opened 20 new stores, 2011 when it opened 39, and 2007 when it opened 112, Heschmeyer reports.

Kohl’s is cutting the money it spends on real estate, and that money is going to technology, including IT resources and the company’s e-commerce business, according to Wesley S. McDonald, Kohl’s CFO.

Big Lots said in its earnings conference call last month that is plans to divert some real estate capital to test initiatives that could provide better return.

“We’ve consistently said that we would not just open new stores to hit a number,” said Charles W. Haubiel, chief administrative officer and executive vice president of Big Lots. 

• “Capital Area’s Apartment Boom Could Fizzle” by Dawn Wotapka and Robbie Whelan of The Wall Street Journal.

The Washington D.C. area has long been seen as recession-proof due to its high number of federal employees that retain jobs whether the economy is good or bad. That reputation had multifamily developers flocking to the area during the recession, but now they could be overbuilding, Wotapka and Whelan report.

Developers are expected to deliver 15,000 new apartments this year, with 11,000 expected in 2014. This compares to the 6,000 unites delivered each year on average over the past decade, according to Delta Associates.

Some are concerned the sequester could impact the number of units sold in the area as federal employees lose their jobs due to budget cuts, Wotapka and Whelan report.

“At some point there [are] simply not enough warm bodies to fill all the units that they’re building,” Anirban Basu, chief executive of economic consultancy at Sage Policy Group, told The Wall Street Journal.

• “What Are the Real Estate Implications of T-Mobile/MetroPCS’s Merger?” by Randyl Drummer of CoStar. 

The Federal Communications Commission (FCC) last week approved the merger between T-Mobile and Metro PCS, which creates the fourth-largest wireless company, and concerns already have arisen over the commercial real estate implications, Drummer reports.

T-Mobile and MetroPCS say the proposed transaction could result in savings of approximately $5 billion to $6 billion. Savings would come from merging the networks into one, decommissioning overlapping cell sites and eliminating of overlapping functions, Drummer notes.

Some worry that this could mean store closings and job cuts. But the two companies have pledged that they have no plans to close domestic call centers or retail stores, and plan to increase their number of overall workers in the United States, according to FCC Commissioner Jessica Rosenworcel.

• “J.C. Penney Advances as ISI Recommends REIT-Like Entity” by Lauren Coleman-Lochner of Bloomberg. 

Per the suggestion of an analyst at ISI Corp., J.C. Penney is considering turning its top 300 stores into a real estate investment trust-like entity that would sublet space to other brands, Coleman-Lochner reports.

“JCP’s most valuable asset is its low-cost real estate, and we believe there are many premium brands that would potentially be interest in subleasing space within the best location,” the analyst, Omar Saad, wrote in a note this week.

The suggestion comes after J.C. Penney’s annual sales dropped by a whopping 25 percent to $13 billion in 2012, its lowest in at least 25 years, Coleman-Lochner notes.

However, J.C. Penney has agreements with landlords that would largely prevent subleasing, which would make the plan challenging to execute, Liz Dunn, an analyst with Macquarie Group, told Bloomberg.

Four on Friday: Ryan Rivera of Hartman Simons

Hartman Simons was proud to recently promote longtime associate Ryan Rivera to partner. In today’s Four on Friday, we get a chance to ask Rivera about his practice, his take on the current commercial real estate market and his love of a good (and long) run.

Give us a brief overview of your practice: what kinds of commercial real estate matters do you focus on?

While my practice includes all areas of commercial real estate, my focus continues to be on retail developments, including the acquisitions and leasing of shopping centers. In addition to retail development, industrial has recently taken on a greater focus. My practice has included a significant amount of warehouse leasing over the past year, along with the acquisitions and sales of existing industrial parks.

Hard to believe, but we're already approaching the end of the first quarter. What's your quick take on how the commercial real estate sector has performed during the first three months of 2013? 

On a personal level, I’ve been fortunate to work closely with a few national retailers that are rapidly expanding and several developers that are going full speed ahead with ground-up retail and mixed-use developments, which gave me the opportunity to work on a quite a few deals during the first quarter.

In contrast to the last few years, most of the deals that have hit my desk have been new construction (as opposed to second-generation space), including new developments and expansions at existing projects. While the deal volume for the sector may not be anywhere close to pre-recession levels, the new developments and expansions that I’ve seen in my capacity as an attorney for both landlords and tenants generally appear to be successful and have been opening at nearly full occupancy.        

What brought you to Hartman Simons?

As a second year law student at Emory University School of Law, I reached out to Hartman Simons due to my interest in commercial real estate. A few phone calls and interviews later, I had an offer to work here as a summer associate in 2003. Ten years later, I’m still here and couldn’t imagine practicing anywhere else.

We understand that you completed your first marathon last fall – are you still regularly pounding the pavement and what are some other ways that you enjoy spending your time outside of the office?

I’m running the Publix Half-Marathon this Sunday in Atlanta and recently registered for the Chicago Marathon this fall. Having experienced the indescribable feeling of accomplishment that comes from crossing the marathon finish line, I’m officially hooked on running and plan to keep running marathons.

While I always enjoy a round of golf with my brother and a few of my colleagues here at Hartman Simons, my partner Jeremy Cohen would tell you that I should stick to running.  

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The Wednesday Wrap: March 13, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Report: Apartments worth $2.9B to Atlanta economy” by Jacques Couret of The Atlanta Business Chronicle.

Apartment construction and operations contributed $2.9 billion to the Atlanta economy and supported 26,400 local jobs in 2011, according to a new report by the National Multi Housing Council and the National Apartment Association. 

Metro Atlanta has roughly 383,800 apartments housing about 761,300 people, Couret reports.

The report also noted that building permits for apartments fell 82 percent from 2007 to 2011. According to the report, new apartment construction has accelerated lately, but is insufficient to meet current demand. 

• “Survey: U.S. Expansion Is Key Growth Strategy for Retailers in 2013” by Marianne Wilson of Chain Store Age.

Expansion within the United States remains a key growth strategy for retailers, according to a new report from BDO USA, which surveyed 100 retail chief financial officers. 

Thirty percent of the executives said U.S. expansion will be their top growth tactic in 2013, while 24 percent said improving merchandise assortment is their priority, and 22 percent responded that they will focus on e-commerce and mobile commerce, according to the survey.

“The opportunities abroad and online are clear, but retail executives still believe that U.S. stores are a core part of the business,” Ted Vaughan, partner in the retail and consumer products practice as BDO USA, told Chain Store Age.

• “Boston Booms as Workers Say No to Suburbs” by Nadja Brandt of Bloomberg.

In one of the biggest neighborhood transformations in Boston history, commercial development is booming along the South Boston waterfront, Brandt reports.

A growing workforce of educated young adults has fueled the boom in Boston, where the office vacancy rate is among the lowest of the major markets in the United States, Brandt notes.

Construction spending in Boston increased an estimated 37 percent in the year that ended June 30, the most since 2008, according to the mayor’s office. 

As home to 50 universities and colleges, including Harvard University and the Massachusetts Institute of Technology, Boston’s thriving technology and life sciences industries are expected to further facilitate the growth of commercial development in the city, Brandt reports.  

• “Construction That Focuses on Health of Residents” by Joe Gose of The New York Times.

Doctors, social agencies and community groups are arguing that land-use planning can improve the public’s health, and developers are starting to test the theory, Gose reports.

For instance, the housing authority in Denver used a new tool known as a health impact assessment to help encourage physical activity and environmental sustainability while drafting the plans for the redevelopment of a 17-acre site near downtown, Gose notes.

The development will feature geothermal and solar power technologies, centrally located and well-lit elevators, and neighborhood gardens for growing healthy foods, Gose reports.

A typical health impact assessment comprises six steps to identify a project’s potential health impacts and ways to mitigate them, Gose notes.

• “Al Jazeera in Site Hunt” by Keach Hagey and Eliot Brown of The Wall Street Journal.

News network Al Jazeera is looking for a space for its New York headquarters, where it plans to launch a U.S. cable channel, Hagey and Brown report. 

Al Jazeera has taken a look at the former New York Times building and is reportedly working with CBRE Group, the reporters note.

The office space the network considered incorporates the top 11 floors of the former New York Times building, which is owned by the Blackstone Group, Hagey and Brown report.  

Hartman Simons' Summey Orr Appears on WSB-TV to Discuss Proposed Hines Development in Sandy Springs

Hartman Simons Managing Partner Summey Orr appeared on WSB-TV on Monday to discuss Hines' proposed mixed-use development in Sandy Springs, Ga.

The Houston-based developer is seeking to rezone land near the intersection of Georgia 400 and Abernathy Road to accommodate a mixed-used development that would, according to the Atlanta Business Chronicle, eventually include 1.5 million square feet of office space, 150,000 square feet of retail space, 500 multifamily units and a 250-room hotel.

The WSB story featuring Orr's comments is below:

The Wednesday Wrap: March 6, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Multifamily Development Projected to Reach Four-Year High” by Carisa Chappell of REIT.com.

Analysts are projecting that 2013 will bring the largest wave of new apartment supply in several years, Chappell reports.

This year will be the first since 2009 that the number of new apartment units added will be at a historic-average level, according to estimates from CoStar. CoStar is projecting 140,000 units will be delivered in 2013.

Some markets could see higher vacancy rates as they become saturated with new units, Chappell reports.

Rent growth remains moderate in some areas as income growth is slow and renters are finding housing more affordable, Chappell notes.

• “More Employers Choosing ‘Open’ Offices” by Victor Epstein via USA Today.

Some of the nation’s largest employers are spending billions to transform workplaces into “open offices,” Epstein reports.

Use of open-office design — a style that ditches traditional corner offices and cubicles for collaborative workspaces — is growing at a double-digit pace, experts say. 

Open offices leverage today’s cordless technology for communal workspaces. Cubicle walls are lowered, and private offices are relocated away from windows, Epstein reports.

The green-building movement also has played a role in the new designs as natural light is utilized more, Epstein notes.

“It’s about building the environment that we need to attract and retain today’s knowledge workers,” said Ralph Eucher, who is spearheading the renovation of Principal Financial Group’s offices in Iowa.

• “Rental, For-Sale Markets Buck Odds, Rise Together” by Bendix Anderson for National Real Estate Investor.

Traditionally, apartments and for-sale housing markets directly compete with each other, but today rental demand and housing sales are rising at the same time, according to Walter Maloney of the National Association of Realtors.

During the past few years, growth in the number of households lagged as many adults were living in shared dwellings. But now more people are deciding to live alone, formulating new households and creating demand for both rentals and for-sale housing, Anderson notes.

Because housing inventory has been low for so long, both rental units and for-sale houses are in short supply, Anderson reports. 

• “Regional Mall REITs Face Limited Growth Opportunities in 2013” by Elaine Misonzhnik of Retail Traffic.

Conditions in the regional mall REIT sector will remain about the same in 2013, with few opportunities for acquisitions or development of new properties, according to sector analysts.

The good news is that occupancies and tenant sales should remain strong and rents are expected to rise, Misonzhnik reports. At the end of the fourth quarter, the national vacancy rate for regional malls was only 8.6 percent, according to Reis, while asking rents only rose 1 percent in 2012.

This means regional mall REITs should be able to raise rents as more retailers expand, according to investor Todd Sullivan.

Some regional malls may be able to grow this year through redevelopment and expansion of existing centers, Rich Moore, a REIT analyst with RBC Markets, told Misonzhnik.

• VIDEO: “REIT Investors More Confident in Health Care, Mortgage Sectors in February” by REIT.com.

In this clip, REIT.com’s Carisa Chappell sits down with Brad Case, NAREIT’s senior vice president for research and industry information, to examine the REIT market.

Case discusses REIT performance during February, the increased investor confidence in the healthcare and mortgage sectors, and concern over the influence of federal budget cuts on the REIT market.

The Wednesday Wrap: Feb. 27, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Commercial Real Estate Forecast Shows Lower Vacancies, Higher Rents” by Carisa Chappell of REIT.com.

Vacancy rates are trending downward in each of the commercial real estate sectors, according to the quarterly commercial real estate forecast from the National Association of Realtors (NAR).

NAR is projecting positive net absorption and rent growth in 2013 for the office, industrial, retail and multifamily markets, according to NAR's chief economist Lawrence Yun. 

“Overall commercial real estate leasing activity continued to grow in most markets during the closing months of 2012, which is modestly lowering vacancy rates in all of the commercial sectors early this year,” Yun told REIT.com.

• “Office Supplies Merger Likely to Present Challenge to Landlords” by Elaine Misonzhnik of Retail Traffic.

Amid struggling times for office-supply retailers, OfficeMax and Office Depot announced a plan last week to merge the two companies. But market observers are speculating the merger will cause problems for landlords. 

Office Depot estimates that the merger will result in anywhere from $400 million to $600 million in annual cost synergies by the third year, according to a press release. A significant portion of those dollars is likely to come from store closings, according to Morningstar analyst Liang Feng. At least 100 or 200 stores will be closed over the next few years, Feng estimates.

The large spaces left vacant by the closings could be problematic for landlords, as most big-box retailers have been downsizing lately, Lew Kornberg of Jones Lang LaSalle told Misonzhnik.

• “Big Real-Estate Firms Are Going to School” by Dawn Wotapka of The Wall Street Journal.

Some of the biggest names in real estate — from Lennar Corp. to Brandywine Realty Trust — are investing in housing for college students, Wotapka reports.

Real-estate firms are looking to diversify into areas considered less sensitive to economic downturns, Wotapka notes. During the recession, single-family homes declined, and apartment landlords were forced to reduce rent, while student-housing landlords were able to raise rent.

As newcomers come in to the sector, established players are buying up properties rapidly in order to remain competitive, Wotapka reports. 

Analysts are concerned that new investors are unaware of the hidden risks and costs in student housing, which requires more maintenance and management oversight than typical apartments do, Wotapka notes.

• “Self Storage Gains Cachet as Values Rise” by A.D. Pruitt of The Wall Street Journal.

Self-storage facilities are the subject of increased investor interest, Pruitt reports.

Just 10 months ago, cap rates on storage space were near 7 percent, generally several percentage points higher than cap rates on most other types of commercial real estate, according to Green Street Advisors.

But recent activity by Acadia Realty Trust, which sold 14 self-storage properties for about $300 million and a cap rate of 5.5 percent, showed that self-storage cap rates are now quite competitive, Pruitt notes.

Although pinched during the recession, self-storage now has record-high occupancy rates around 90 percent. Landlords have raised rents about 5 percent on existing tenants over the past couple of years, according to Pruitt.

• “Home Prices in 20 U.S. Cities Increase by Most Since 2006” by Michelle Jamrisko of Bloomberg.

The S&P/Case-Shiller index of property values, which measures home values in 20 U.S. cities, increased 6.8 percent in December on a year-over-year basis, the biggest such gain since July 2006. Nineteen of 20 cities in the index showed gains in property values.

Atlanta and Detroit saw their biggest year-over-year gains since 1991, Jamrisko reports. Las Vegas and Los Angeles had the biggest month-over-month gains.

Only New York saw houses losing value, dropping 0.5 percent last year.

The Wednesday Wrap: Feb. 20, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Boom in Student Housing Construction Stokes Concerns of Oversupply” by Randyl Drummer of CoStar.

A large volume of student-housing projects have been announced recently during a time of lower-than-expected college enrollment numbers, slowed pre-leasing and rising tuition costs, raising concerns over whether demand will meet supply, Drummer reports.

However, developers say pent-up demographics will drive demand for dorms and off-campus housing in the coming years, according to Drummer.

More than three-quarters of the 13.5 million students now enrolled in four-year undergraduate programs at large public institutions live off-campus, which creates a supply gap of about 1.5 to 2.2 million beds, said consultant Michael Gallis during a Campus Crest Communities presentation.

However, investors and analysts are concerned about the overwhelming amount of supply ready to hit the market between now and 2015. “We’re very concerned in general about student housing,” said Hans Nordby of CoStar’s Property and Portfolio Research. “[T]he amount of student housing supply in this country right now is almost shocking.”

• “CRE Can Help Solve Climate Change” by Rayna Katz of Globe Street. 

During last week’s State of the Union address, President Obama issued a call-to-action to cut energy consumption in homes and businesses in half over the next 20 years, and New York City’s commercial real estate industry could help significantly in this effort, according to a new study by the Urban Green Council.

As the country’s largest city, New York City could feasibly cut its carbon emissions 90 percent by 2050, the study says.  

Technologies like improved insulation, heat pumps and transportation electrification could help reduce carbon pollution from New York City’s buildings and transportation, which together make up 96 percent of the city’s greenhouse gas emissions, according to the report.

• “Houston, Energy Sector’s Peak Nowhere in Sight” by Robert Carr of National Real Estate Investor.

More than half of the top performing office markets in the United States today are primarily technology- or energy-driven, as the country takes steps toward independence from foreign energy sources, Carr reports.

Houston is leading the pack, enjoying an unemployment rate at less than 6 percent. The city’s 195 million square feet of office space only make up 4 percent of the U.S. total, yet Houston accounted for almost 13 percent of the country’s total office absorption in the past year, according to a fourth-quarter report from Jones Lang LaSalle.

Houston is expected to remain the U.S. energy capital for 2013 and beyond. More than 50 percent of the 4.2 million square feet of office space now under construction has been pre-leased, Carr reports.

“Developers just can’t keep up with demand in Houston,” said Rudy Hubbard of JLL. “[T]here’s far more demand for people to own office buildings than supply.”

• “Bill Proposed to Require Online Retailers to Collect Sales Tax” by Allen Kenney of REIT.com.

A bill introduced in the House of Representatives last week is aimed at requiring online retailers to collect sales taxes on purchases, Kenney reports.

The Marketplace Fairness Act would help level the playing field between online retailers and brick-and-mortar stores, supporters say. States lost an estimate $23.3 billion in uncollected sales taxes last year, according to the National Conference of State Legislatures.

The bill has garnered support from industry organizations such as NAREIT and even some online retailers, like Amazon, Kenney reports.

• “New Hubs Arise to Serve ‘Just in Case’ Distribution” by Matt Hudgins of The New York Times.

Retailers and logistics companies have altered their supply chains by adding more distribution hubs, creating real estate opportunities in markets beyond traditional seaport hubs, according to CoStar.

The changes come as Hurricane Sandy and other unexpected events have prompted companies to alter just-in-time management to what is called “just-in-case” management.

Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ of CoStar. Just-in-case planning keeps merchandise available should the supply chain by disrupted by an unforeseen event, such as when ports in New Jersey and New York were affected by Hurricane Sandy.

Companies are looking for a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost,” Circ told The New York Times.

Retailers looking for competitive edge are now offering fast shipping from nearby distribution centers, Hudgins reports.

The Wednesday Wrap: Feb. 13, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “CMBS Deliquencies Reach 11-Month Low” by Carisa Chappell of REIT.

CMBS delinquencies fell in January to their lowest level in 11 months, according to data from Trepp LLC.

The delinquency rate dropped 14 basis points in January to 9.57 percent, the lowest level since February 2012, when the rate was 9.38 percent. Delinquencies hit an all-time high in July 2012 at 10.36 percent. 

Resolutions had a slight uptick in January, as more than $1.2 billion in loans were resolved with losses; this helped drive the delinquency rate down, according to Manus Clancy of Trepp.

• “Commercial Properties Lead the Charge for EV Stations” by Jennifer V. Hughes of National Real Estate Investor.

Landlords are installing electric vehicle (EV) charging stations at office, retail, hotel and other commercial properties in order to gain a competitive edge and attracts tenants and customers, Hughes reports.

Data shows that EV drivers return to a retail location once a month, while traditional drivers might return once a quarter, and the EV driver also stays twice as long, according to Brian Koontz of ECOtality Inc., the company that manages the Department of Energy’s EV Project initiative to expand EV infrastructure nationwide.

“REITs are always looking at how they can get a competitive edge, how they can strengthen their sustainability, how they can attract key tenants and how they can make their property more attractive to customers,” Koontz told Hughes. “This is one way to do that.”

• “A Hotel-Condo Revival” by Kris Hudson of The Wall Street Journal.

Although they were hit hard during the economic downturn, developments that combine luxury hotels and condominiums have started again, Hudson reports.

Trying to avoid past mistakes, developers are only building in top markets and are incorporating fewer condos into each project.

One such project is Starwood Capital Group’s plan to convert the former Ganservoort Hotel in Miami into a luxury, eco-conscious hotel with 417 hotel rooms and 163 for-sale condos. Starwood Capital and its partners intend to spend more than $1 billion on a total of four luxury hotel-condo projects in the United States.

Another example is Marriott International Inc., which has eight hotel-and-residence projects under planning and construction in the United States and the Caribbean.

• “Are JCPenney Store Closings on the Horizon?” by Elaine Misonzhnik of Retail Traffic.

It’s been more than a year since former Apple exec Ron Johnson took over as head of J.C. Penney Co., and the results so far haven’t been heartening, Misonzhnik reports. It is being reported that the company might announce a new round of layoffs at its headquarters, and analysts are wondering whether store closings will follow.

In third-quarter 2012, same-store sales declined 26.1 percent, and total sales fell 26.6 percent, according to J.C. Penney reports. Fourth-quarter results have not been released.

With 1,102 stores totaling 111.2 million square feet, the company can’t sustain itself with such limited sales, said Howard Davidowitz of the retail consulting and investment banking firm Davidowitz & Associates Inc.

• VIDEO: “Survey Shows International Investors Favor U.S. Commercial Real Estate” by Carisa Chappell of REIT.com.

In this clip, REIT.com’s Carisa Chappell sits down with Jim Fetgatter, chief executive of the Association of Foreign Investors in Real Estate (AFIRE), to discuss the findings of AFIRE’s recent annual survey. Chappell and Fetgatter hit on topics including international investor sentiment about the United States, other markets of interest around the globe and the popularity of the multifamily sector.

The Wednesday Wrap: Feb. 6, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Retail Investment Sales Up 20 Percent in 2012” from Retail Traffic.

Investment sales volume in the retail sector rose sharply last year, according to Real Capital Analytics (RCA).

Retail investment sales totaled $52.8 billion in 2012, up 20 percent from 2011, according to RCA. The number of transactions involving significant retail properties rose to about 4,400, also an increase of 20 percent.

New York City, Chicago and Los Angeles saw the greatest volume of retail transactions last year, Retail Traffic reports.

Indicators pointed to emerging retail markets in San Jose, Calif., which saw a 224 percent year-over-year increase in retail investment sales; Orange County, Calif., where sales were up 138 percent; and Cleveland, which saw a 112 percent increase in sales.

• “E-Commerce Plays Major Role in Industrial Sector Growth” by Robert Carr of National Real Estate Investor. 

The e-commerce boom has the industrial market emerging strong this year with declining vacancy and modest rent growth in most markets, Carr reports.

It may be causing destruction to the bricks-and-mortar retail industry, but e-commerce development helped prevent the downfall of the national industrial market, Carr says. As e-commerce continues to expand, demand for new distribution centers is rising, especially around ports and in major population centers, according to Cushman & Wakefield’s 2013-2016 Industrial Forecast Report.

The popularity of online retailer Amazon has inspired companies like Home Depot, Target and Walmart to evaluate their three-to-five-year multichannel strategies, Kris Bjorson of Jones Lang LaSalle told Carr.

These companies already have their industrial supply chains in place, but may need to alter their distribution centers to include trained workers for more automated processes, add parking to meet increased shipping demands and renovate buildings to handle single-item picking, Bjorson said.

• “Emory Point Welcomes Bevy of Phase 1 Retailers” by Josh Green of Curbed Atlanta.

Phase I of the Emory Point development, a collaboration between Atlanta-based firms Cousins Properties and Gables Residential, is now open and nearly 90 percent committed, Green reports.

Phase I opened last week with a group of tenants that includes Jos. A Bank Clothiers, LOFT by Ann Taylor, American Threads, Marlow’s Tavern, Tin Lizzy’s, Bonefish Grill and CVS Pharmacy.

Developers plan to break ground this summer on Phase II, which will include an additional 40,000 square feet of residential and retail space, according to a release by Cousins Properties.

• “Looking for a New F.B.I. Headquarters, the Government Proposes a Trade” by Eugene L. Meyer of The New York Times.

The F.B.I. is ready to relocate from its headquarters in the Hoover building on Pennsylvania Avenue in Washington, D.C., hoping to swap the building for a new headquarters in the suburbs, Meyer reports.

The F.B.I.’s current location sports outdated architecture that would be too costly for the government to demolish and rebuild, but its prime location is attracting plenty of interest, Meyer notes.

The General Services Administration (G.S.A.) is hoping to find a developer to take over the building and in exchange provide a new F.B.I. headquarters in the Washington suburbs. The G.S.A. held an “industry day” last month to discuss the new building, which 450 interested developers, architects, brokers and consultants attended, the largest for any such offering in memory, according to officials.

The F.B.I.’s search for a new headquarters comes as the government looks to dispose of unused or underused properties and is looking for buildings that will cost less to maintain, Meyer reports.

• VIDEO: “Questions Remain About Office Vacancy” by Ian Ritter of Globe St.

The Winter/Spring Allen Matkins UCLA Anderson Forecast, discussed in this video, shows there is still concern in the commercial real estate industry about future office vacancy rates as new product comes to the market.

Hartman Simons' Summey Orr Appears on "Commercial Real Estate Show" to Discuss U.S. Industrial Market

Orr

Last week, Hartman Simons partner Bob Simons appeared on the "Commercial Real Estate Show" radio program to discuss the U.S. retail market. This week, it was managing partner Summey Orr's turn to step into the studio.

Orr is a guest on the latest episode of the program, which takes a detailed look at the U.S. industrial sector. Other guests include Ryan Severino, senior economist for Reis, and Larry Callahan, CEO of Pattillo Industrial Real Estate. The one-hour, weekly show is hosted by Michael Bull, president and founder of Bull Realty.

The episode is now available for streaming or download at www.CREshow.com and on iTunes.

The episode also will air from 10 a.m. to 11 a.m. this Saturday in Atlanta on biz 1190 AM. The "Commercial Real Estate Show" also airs in nine other markets across the United States on the Wall Street Business Network.

To hear Bob Simons' appearance on the show, click here.

The Wednesday Wrap: Jan. 30, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Retail Leasing Fundamentals Improving at a Glacial Pace” by Elaine Misonzhnik of Retail Traffic.

Retail sector fundamentals showed only slight improvement in the fourth quarter of 2012, and researchers warn that the sector could continue to struggle with the broader U.S. economy showing slow improvement, Misonzhnik reports.

The vacancy rate for neighborhood and community shopping centers averaged 10.7 percent in the fourth quarter, a decrease of 30 basis points from the fourth quarter of 2011, according to Reis. Asking rents only showed a 0.5 percent increase year-over-year, to $19.08 per square foot.

Regional malls saw a 60-basis-point decline in average vacancy rate, to 8.6 percent. Asking rents in those malls rose 1 percent during 2012, to $39.31 per square foot.

• “Retail into Seniors Housing: A Natural Progression” by Robert Carr for National Real Estate Investor.

City officials and developers nationwide are looking at replacing underperforming retail properties with seniors housing, after the latter entered 2013 as one of the top sectors in terms of demand and investment, Carr reports.

The seniors housing occupancy rate has risen consistently for the past 11 quarters, reaching 89.1 percent in the fourth quarter, according to a report from the National Investment Center for the Seniors Housing & Care Industry. As Baby Boomers age, the demand for seniors housing will continue to grow, Carr notes.

“Every community has a dead big box or vacant strip mall that’s often a prime site for seniors housing,” said Georgia Tech professor and redevelopment expert Ellen Dunham-Jones. “This matches the demand, as the seniors are still there in the community, and they don’t want to leave.”

• “A Third of Barnes & Noble Stores May Close in Next Decade, Report Says” by Tiffany Hsu of The Los Angeles Times.

Barnes & Noble, which now has 689 physical stores, will end up with 450 to 500 stores in 10 years, according to Mitchell Klipper, chief executive of Barnes & Noble’s retail group.

As reading habits change and digital publications evolve, the growth rate for Barnes & Noble stores has shriveled, with the company opening only two stores this fiscal year, Hsu reports. 

• “Las Vegas Area Leads U.S. in Home-Construction Gains” by Prashant Gopal of Bloomberg. 

Las Vegas had the biggest increase housing starts in the fourth quarter, despite being one of the hardest-hit cities during the real estate crash.

Construction of single-family homes rose 96 percent in the Las Vegas area, 92 percent in Naples, Fla., and 91 percent in Atlanta, according to a report from Metrostudy. The average U.S. city experienced a 47 percent increase.

Demand is starting to pick up as mortgage rates near record lows and employment improves, Gopal notes.

“The Las Vegas market is coming back, but the percentage gains look astronomical because of low numbers we’ve been seeing up to now,” said Brad Hunter, chief economist of Metrostudy, to Gopal.

• “Some Assembly Required: FCRC Builds Modular Apartment Tower” by Bendix Anderson for National Real Estate Investor.

A residential high-rise tower slated for the Atlantic Yards development in Brooklyn, N.Y., will be largely built in a factory, Anderson reports.

The foundation and steel framing of the tower will be built onsite, but the interiors of the apartments will be constructed at a factory. The factory-assembled modules will include sets of rooms that will be lifted into place by cranes to be attached to the building’s steel frame.

“This will be the tallest building in the world using modular technology,” Bruce Ratner, chairman and CEO of FCRC, told Anderson.

Four on Friday: Bob Simons Talks Retail Real Estate on the "Commercial Real Estate Show"

 

Simons

Hartman Simons partner Bob Simons appeared this week on the “Commercial Real Estate Show” radio program to discuss the recent performance of the U.S. retail sector. For today’s Four on Friday, we highlight four comments Simons made on the show.

 

• Confidence Is Rising. The retail sector is benefitting from the growing optimism of all its important players, Simons said.

“There’s confidence from the consumers – [they] are starting to spend more money out there,” he noted. “There’s increased confidence from the equity markets. Going back to ’09, 2010, the equity markets were running as fast as they could from the retail sector. They’re starting to come back, and valuations are starting to stabilize, improve, which brings the lenders back to the fold.”

• Sporting Good Retailers Are Growing. Chains such as Dick’s Sporting Goods, Academy Sports, Cabela’s and Bass Pro Shops are expanding aggressively, Simons noted. Other retailers adding stores at a brisk pace include grocery stores, in particular the specialty chains that specialize in organic items.

• Investment Sales Market Is Bifurcated. Core retail properties located in the major, gateway markets are in demand from investors, Simons said. “Those properties are hot. Cap rates for those properties are trading back at 2007 levels, maybe even stronger.”

On the flip side, the market for retail sites in secondary and tertiary markets is fairly weak, according to Simons. “If you’re the best site in that location, you’re OK, but if you’re not one of the top two positioned [retail] properties in that market, you’re going to be in trouble, and that gap [in investor demand] is going to continue to widen.”

• Be Ready. Many retail sites are still in trouble, and investors looking to purchase foreclosed properties need to be able to pull the trigger quickly on a sale, Simons said. “It’s fast paced. You’ve got to have the equity. You’ve got to have 100 percent of the price in your pocket and be able to move, to take advantage of an opportunity quickly and close.”

“If you’re still raising money, or there’s any debt component to [your proposed deal}, forget it,” he added.

Simons appeared on the episode along with fellow guests Dan Fasulo of Real Capital Analytics, Jeff S. Fuqua of Fuqua Development and John Crossman of Crossman & Company. The show is hosted each week by Michael Bull of Bull Realty.

The episode is now available for streaming or download at www.CREshow.com and on iTunes.

The episode also will air from 10 a.m. to 11 a.m. this Saturday in Atlanta on biz 1190 AM. The "Commercial Real Estate Show" also airs in nine other markets across the United States on the Wall Street Business Network . 

 

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Hartman Simons' Bob Simons Appears on "Commercial Real Estate Show" to Discuss U.S. Retail Market

Bob Simons

Hartman Simons partner Bob Simons is a guest on the new episode of the "Commercial Real Estate Show" radio program. Simons joins show host Michael Bull of Bull Realty and three other guests - Dan Fasulo of Real Capital Analytics, Jeff S. Fuqua of Fuqua Development and John Crossman of Crossman & Company - to discuss the state of the U.S. retail market.

The episode is now available for streaming or download at www.CREshow.com and on iTunes.

The episode also will air from 10 a.m. to 11 a.m. this Saturday in Atlanta on biz 1190 AM. The "Commercial Real Estate Show" also airs in nine other markets across the United States on the Wall Street Business Network. 

The Wednesday Wrap: Jan. 23, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Hotel Buyers To Play Catch Up with Rest of CRE Investment Market in 2013” by Mark Heschmeyer of CoStar.

The hotel segment was the only sector of commercial real estate that did not see a year-over-year increase in sales transactions in 2012, according to new CoStar research.

According to CoStar, the hospitality sector experienced a 16 percent decline in sales from 2011, from $21.7 million to $18.1 billion.

However, it seems buyer groups are showing a renewed interest in acquiring lodging assets, according to Jones Lang LaSalle (JLL). “Inadvertent hotel owners, like banks and receivers, will continue to drive a significant share of hotel product to market,” Mark Wynne-Smith of JLL’s Hotels & Hospitality Group told Heschmeyer. 

• “CoStar Sounds Early Warning On Multifamily Development” by Bendix Anderson for National Real Estate Investor.

Real estate analysts at the CoStar Group say the current rate of multifamily development could eventually lead to an oversaturation of the market, with too much new development coming on line at the same time and driving up vacancy rates.

Apartments currently under construction make up 1.4 percent of the total apartment inventory in the top 54 markets, a much higher percentage than is found in other property segments, according to CoStar research.

It’s uncertain whether apartment construction is “oddly high” or whether the volume of construction in other sectors is ”oddly low,” Anderson notes. With fears that the next wave of development could be too much, CoStar is recommending that developers make sure not to overbuild in certain markets.

• “Amazon Drives Seattle Office Market Surge” by Kristina Shevory of The New York Times

Amazon’s recent activity in the Seattle office market has triggered rent increases and a drop in vacancies in the city, Shevory reports.

Last year, Amazon bought 1.8 million square feet in Seattle for its headquarters, the biggest office purchase nationwide in 2012. The online retailer already leases or owns 2.7 million square feet in Seattle, and plans to more than double that number with the construction of three of its own office towers this year, Shevory reports.

Amazon’s expansion has led to increased activity in Seattle’s office market, with technology companies leading the way; the vacancy rate was 10.7 percent at the end of 2012, down from 12.4 percent in fourth-quarter 2011, according to commercial real estate brokerage Kidder Matthews.

“We’re seeing a lot of companies that want to be closer to Amazon and that synergy,” Jesse Ottele of CBRE in Seattle told Shevory. 

• “Walmart Adds Non-Walmart Retail Space to Midtown Miami Project” by Oscar Pedro Musibay of South Florida Business Journal.

Walmart will lease space in its new 180,000-square-foot store in Midtown Miami to other retailers, Musibay reports

Walmart will use 16,000 square feet of space on one side of the building to incorporate small restaurants and shops. The national retailer is hoping the move will address opposition form local business people concerned that the big-box store will hurt small businesses in the area, according to Musibay.

• “DC Hotels Post Inaugural Bump” by Erika Morphy of Globe St.

Washington D.C.’s hotel industry got a bump this week, as an estimated 600,000 to 800,000 visitors flooded the city for Monday’s presidential inauguration.

“There is no doubt that the DC market outperforms in presidential inauguration years, and we expect that 2013 will be no different, although not as robust as President Obama’s first inauguration,” Robert Webster of Jones Lang LaSalle’s Hotels & Hospitality Group told Morphy.

Webster said that the Washington D.C. hotel market experiences RevPAR growth premiums that are 4.7 percentage points higher that the national average on inauguration years. 

Four on Friday: David Birnbrey of The Shopping Center Group

In today’s Four on Friday, we pose not four, but five questions to David Birnbrey, chairman and co-CEO of The Shopping Center Group, a full-service retail real estate firm headquartered in Atlanta. David fills us in on his firm’s activity, offers his assessment of the retail sector as a whole, and provides in-depth analysis of and a prediction for Sunday’s NFC championship game between the Falcons and 49ers.

HS: Give us a brief overview of The Shopping Center Group and the services the firm provides.

Birnbrey: Since 1984, The Shopping Center Group has provided a full assortment of retail real estate advisory services to landlords, developers, investors, financial institutions and retailers throughout the eastern United States. These services include project leasing, property management, tenant representation, investment advisory services, investment property sales, finance, construction supervision, disposition of surplus properties, receivership and development consulting.

We have 20 offices from New York to Miami and more than 200 employees and associates. We’re currently representing more than 300 national and regional retainers and restaurants, leasing more than 50 million square feet of retail space, and managing more than 10 million square feet. In a stabilized environment, our company will complete approximately $300 million in investment sales. 

HS: How would you say 2012 turned out for the retail sector, and what do you see in store for 2013?

Birnbrey: 2012 turned out to be an extremely good year for our company with a volume that came close to matching our high-water mark of pre-recession 2007. Although vacancy rates went down noticeably in 2012, it was almost all in existing space with very little new construction in the retail sector. That trend will continue through the first part of this year, but we’re hopeful that construction of new projects will resume by the third quarter.

Stores are getting smaller with retailers concentrating on higher productivity per square foot and eliminating excessive inventory levels. While e-commerce continues to be a threat to the future of bricks and mortar, the retailers and restaurants that concentrate on delivering value and an enjoyable experience will always prosper.

HS: What drew you to a career in commercial real estate?

Birnbrey: I lacked the talent and the education for anything else. It was this or selling sunglasses on the beach. I burn too easily for the sunglasses gig.

HS: What do you do to relax? 

Birnbrey: I’m not a big relaxer, but I guess it’s playing golf. Meanwhile, my game gets me tense, the cigar makes me dizzy and the score tends to piss me off, so maybe not golf. Let’s go back to this answer: “nothing.”

HS: Bonus question: Have a prediction for Sunday's NFC championship game between the Falcons and 49ers?

Birnbrey: It was obvious last week that the linebackers needed to stay close to the line to prevent Russell Wilson from running, and we couldn’t blitz. That opened up the intermediate passing game for Seattle. Without a blitz, we needed a serious effort from the defensive ends, which we didn’t get. Having John Abraham back for this game will be huge.

Colin Kaepernick might be tougher to defend against than Wilson, but I think the Falcons learned a great deal from the Seahawk game and will do a good job there. Meanwhile, our offense is impossible to contain, too. Falcons prevail, 24-17.

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The Wednesday Wrap: Jan. 16, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Tech and Energy Gains Lead Slow Office Recovery” by Robert Carr of National Real Estate Investor.

Except for in cities that are energy and technology hubs, growth in the office market will be slow in 2013, according to experts from companies such as Jones Lang LaSalle (JLL) and Cushman & Wakefield.

Cities like Houston, Dallas, Denver and San Francisco are showing high levels of office activity, according to John Sikaitis of JLL, who told Carr that California and Texas alone accounted for 60.3 percent of the country’s total net absorption last year.

However, the sluggish economic recovery is holding back the office market elsewhere, with only about 53 percent of the total jobs lost during the recession having been recovered, according to Cushman economist Ken McCarthy.  

But, “if you’re a tech city or energy city, you’re now exceeding the peak,” he said.

• “Barnes & Noble Store Closings Likely as Chain Faces Uphill Battle with Digital Competitors” by Elaine Misonzhnik of Retail Traffic.

After disappointing holiday numbers, Barnes & Noble may face store closures as it tries to compete with digital retailers like Apple and Amazon.com, Misonzhnik reports.

The book retailer reported that for the nine-week period ending Dec. 29, same-store sales fell 8.2 percent, and even online sales decreased 12.6 percent year-over-year.

Barnes & Noble, trying to survive in an industry that has fundamentally changed since the bookseller began operations, will need to start downsizing in the coming months, according to retail consultants Howard Davidowitz and Jeff Green.

Downsizing is likely to take place in the form of store closings rather than reduced store sizes, since bookstores rely on experiential shopping, consultant Steven J. Montgomery told Misonzhnik.

• “Retail Centers See Modest Growth” by Kris Hudson of The Wall Street Journal.

Despite slight growth for malls and strip centers in the fourth quarter, experts still say 2013 should be a stagnant period for retail landlords, Hudson reports.

In the fourth quarter, the average vacancy rate at malls declined to 8.6 percent, down one-tenth of a percentage point from the previous quarter, according to data from Reis. At strip centers, the average vacancy declined 10.7 percent in the fourth quarter, done from 10.8 percent in the third quarter.

After disappointing holiday retail sales, retail landlords and analysts are expecting little improvement, Hudson notes.

“If we couldn’t muster good sales during the holiday season, that doesn’t say much good about sales going forward and how that will translate into demand” for store space, Ryan Severino, a senior economist at Reis, told Hudson.

• “RADCO Acquisitions Illustrate Growing Popularity of Turnaround Deals” by Bendix Anderson for National Real Estate Investor.

RADCO Cos., an Atlanta-based real estate company focused on buying troubled real estate and then reviving them, spent the last two weeks of 2012 growing its apartment portfolio by nearly 1,000 apartments, or about 50 percent, Anderson reports. 

RADCO’s deals mirror a national trend: apartment investors bought more than $9 billion of properties for renovation and redevelopment last year, up from $7 billion in 2011 and $3 billion in 2010, according to Real Capital Analytics.

“There is a liquidity in multifamily, and the fundamentals make value-add multifamily the perfect fit for us today,” said RADCO President and CEO Norman Radow.

• “Nation’s smallest Walmart to open in Atlanta” by Shannon Mullen of Marketplace.

After spending the past few years working on smaller-store concepts, Walmart is getting ready to open its smallest store in the country on the Georgia Tech campus in Atlanta, Mullen reports.

The store will be 2,500 square feet and will feature a pharmacy, check-cashing services and a small selection of groceries.

Walmart came to Georgia Tech a year ago with the idea for an on-campus store, much like the one already open at the University of Arkansas, Mullen notes.

“The 2,500-square-foot space is the only space we have available,” said Rich Steele, head of auxiliary services at Georgia Tech.

The Wednesday Wrap: Jan. 2, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “Malls Get Facelift to Pull In Shoppers” by Kris Hudson of The Wall Street Journal.

The era of new-mall development is over, at least for a while, as many mall owners are now looking to renovations to help malls compete with online shopping, Hudson writes.

Renovations can offer higher returns on investment than new developments, Hudson notes. One example is Twelve Oaks Mall in Novi, Mich., where owner Taubman Centers says it got a 10 percent return on a $63 million project that added a new wing to the mall.

In their renovations, mall owners are concentrating on movie theaters, restaurants and similar sites to lure shoppers away from their computers, according to Hudson.

Owners are only choosing top-performing malls to upgrade in order to get the highest returns, Hudson notes. Simon Property Group is planning to redevelop 25 percent of its top malls, 10 percent of its mid-class malls and none of its lowest-performing malls, according to real estate research firm Green Street Advisors.

• “Strong Investment in Affordable Housing” by Bendix Anderson for National Real Estate Investor.

Affordable housing properties have maintained high occupancies and strong operating income during the financial crisis, according to a new report from accounting firm CohnReznick. This is in part because affordable housing is in short supply, the report says.

“When it comes to affordable rental housing, this report confirms that we have a critical shortage not only in our major cities, but across the entire country,” according to Fred Copeman of CohnReznick. 

Poor economic conditions have helped keep affordable housing projects occupied, according to the report.

Of the 17,118 properties covered in the report, only 9.5 percent were considered underperforming in 2010, meaning they had occupancy rates below 90 percent or had low debt-service coverage ratios. This compares to the 12.6 percent that were considered underperforming in 2009.

• “Survey Finds CRE Investors Refocusing on Strategy as Fog of Uncertainty Begins to Lift” by Randyl Drummer of CoStar.

As uncertainty eases after the 2012 election, investors are refocusing on opportunities in commercial real estate, according to the fourth-quarter 2012 PricewaterhouseCoopers Real Estate Investor Survey.

Survey respondents expect cap rates to continue to compress in the multifamily sector and begin compressing across all property types, leading to an increase in sales activity in 2013.

Many real estate firms were wary of investment during the time before the U.S. presidential election, but survey respondents seem more optimistic going into the New Year, Drummer reports.

“We’re starting to see good news eclipse the bad news, and that makes us want to invest more capital in CRE assets,” one respondent said.

Still, CRE recovery remains uneven and limited to only certain locations and sectors, Drummer noted.

• “High-Tech and Seniors: No Longer Opposites” by Robert Carr of National Real Estate Investor.

Many in seniors housing are realizing that incorporating new technologies into properties can make them more attractive to potential tenants, Carr reports. 

Michael Schonbrun, founder and CEO of Balfour Senior Living, has found his residents are very interested in using iPads for reading in large print and large-screen televisions set up to use Skype to connect with distant family members.

Seniors housing facilities are also looking at using more monitoring devices to track at-risk individuals as well as sensors than can help detect undiagnosed health problems, Carr reports.

It also seems seniors are getting more comfortable with the idea of using robots to aid in everyday tasks, according to a recent study by Georgia Tech’s Human Factors and Aging Laboratory.

Four on Friday: Bisnow’s 2013 Atlanta Real Estate and Economic Forecast

(Above, from left to right: Mark Toro, partner at North American Properties; John Heagy, senior managing director at Hines; Jatin Desai, chief investment officer at Peachtree Hotel Group; Gordon Buchmiller, managing partner of Childress Klein Properties' Atlanta office; and moderator Wes Hudson, commercial real estate leader of CohnReznick's South Central Region.)

Much of the Atlanta commercial real estate community gathered at the Grand Hyatt in Buckhead on Tuesday morning for coffee, networking and a look ahead to next year. The occasion was Bisnow’s “2013 Atlanta Real Estate and Economic Forecast,” and several Hartman Simons attorneys were there to see what two renowned economists and a five-member panel discussion had to say about the state of the economy and the commercial real estate industry.

In the spirit of the Four on Friday series, below are four notable points made during Tuesday’s event: 

• Don’t Get Too Excited about the Economy Just Yet. Rajeev Dhawan, the director of Georgia State University’s Economic Forecasting Center and one of two keynote speakers on Tuesday, predicted that the U.S. economy wouldn’t take a dramatic leap forward in 2013, in part because many international markets will continue to struggle, which will in turn limit U.S. exports.

However, “2014 will be glorious … ,” he predicted. “If somehow we could get rid of 2013, I would and go straight to 2014.” 

Dhawan did predict that ongoing fiscal-cliff negotiations would eventually produce “a credible down payment on [the federal] deficit.”

Mark Vitner, a senior economist with Wells Fargo Securities and the day’s second keynote speaker, largely echoed Dhawan’s sentiments. 2013 “will be challenging at the start of the year” as consumers and businesses adjust to higher taxes and federal spending cuts, but the economy should pick up steam in the latter half of the year, Vitner said.

“When you look at the economy, there’s not a lot of strength,” Vitner added. “Things aren’t great but they are better than they were a year ago in more areas of the economy. The strengths seem to be broadening.” 

• A New Day Has Dawned. The heyday of walk-up, garden-style apartment complexes and of ground-up retail centers in the suburbs has passed, said Mark Toro, a partner with North American Properties. The rise of Millennials, who prefer living and working in walkable, urban centers, means that future apartment and retail development will be concentrated in such areas, he noted. 

The commercial real estate business “as we’ve known it is over for our careers,” Toro said, adding that one of the first things his firm does when considering a property for development is to enter the address at Walkscore.com to get the property’s walkability rating.

• The Office Market Remains Quiet. Furthermore, it could be awhile before it takes off, according to Gordon Buchmiller, a managing partner in Childress Klein Properties’ Atlanta office. “We don’t really see any office markets in the Southeast that we think are healthy,” he said, later adding, “We’re so far from rents that we would need to justify new construction.”

• Distressed Hotel Sales Seem to Be Declining. Jatin Desai, chief investment officer for Peachtree Hotel Group, said his firm’s purchases of troubled hotels are slowing. “2012 was probably a little lighter than 2011,” he said.

“We saw banks give borrowers a little more time,” Desai added. “Banks are becoming healthier … [they] can hold [a troubled hotel] on their books a little longer.”

The Wednesday Wrap: Dec. 12, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Regulatory Break for Mixed-Use Projects” by Joe Gose of The New York Times.

 A recent Federal Housing Administration (FHA) rule change allows the federal government to issue mortgages for condos located in mixed-use buildings with commercial footprints of up to 35 percent, up from the previous limit of 25 percent. That has some developers, like those of the Ponce City Market development in Atlanta, more strongly considering condos as opposed to apartments, Gose reports.

The change is part of an overall change in FHA policy aimed at increasing the development of condominiums and mixed-use properties. The agency also recently increased the number of units that investors can own in a development and loosened up personal-liability rules that apply to the boards and officers of condominium associations.

“We’ve learned that the mixing of development makes for a better urban design, so towns and cities are designing codes to encourage it, and the market is showing interest,” John K. McIlwain of the Urban Land Institute told Gose.

• “Blackstone Takes Over 13 Hotels After Sale Process Fails” by Brian Louis of Bloomberg.

Blackstone Group LP has taken control of more than a dozen hotels from Eagle Hospitality Properties Trust Inc. after the hospitality firm was unable to find buyers for the portfolio and pay off debt held by Blackstone, Louis reports.

Monday marked the deadline for sale, but Eagle said it was unable to sell the properties at a price that would satisfy the debt, according to Louis. The portfolio includes 13 hotels, including Embassy Suites in Boston, Denver and Tampa, Fla.; and a Marriott in Cincinnati.

• “Rent Perks for Landlords: Transit-Oriented Apt. Developers Reap Occupancy, Income Premiums” by Randyl Drummer of CoStar. 

High gas prices and heavy traffic have younger workers and Baby Boomers looking toward city life, and multifamily developers are taking notice by starting more projects close to public transportation, Drummer reports.

There’s been a significant shift over the last couple of years toward projects within walking distance of rail and bus lines, and the landlords of such projects collect higher rents and enjoy higher occupancies, according to CoStar research.

Municipal planners also are focused on creating transit-oriented developments (TODs) with a mix of office, shopping and entertainment located closely together.

Forty-two percent of units under construction today are within short walking distance to trains and buses, according to CoStar’s third quarter report on the multifamily sector. 

State and local governments are becoming more interested in TODs because they believe the developments lead to more economically prosperous communities, Drummer notes. Some governments are creating incentives to encourage such growth. 

• “Miami Beach Walgreens Fetches $1,300 Per SF” by Jennifer LeClaire of Globe St.

A 22,857-square-foot Walgreens drugstore in Miami Beach just traded for $30 million ($1,312 per square foot), making it the second-highest price paid for a drug store in the United States and the highest price for a net-leased asset in Miami Beach, according to LeClaire.

The store’s prime location in Miami Beach’s Art Deco District made it especially valuable, according to Sean Shahar Ziv of Marcus & Millichap, who represented the seller.

“Miami Beach’s combination of a substantial tourism base together with a year-round dense population creates an ideal scenario for retail investment,” Anthony Blanco of The Shopping Center Group told LeClaire. 

• “Starbucks Plans Massive U.S. Expansion. Can Its Growth Plan Succeed?” by Elaine Misonzhnik of Retail Traffic.

Starbucks is planning to open at least 1,500 new units in the United States over the next five years, even after closing many locations only four years ago, Misonzhnik reports.

The chain is growing in an effort to maintain its market share as McDonald’s continues to push its coffee line, according to Jeff Green of retail real estate consulting firm Jeff Green Partners.

Over-expanding got Starbucks in trouble in the middle part of the last decade, Misonzhnik notes, and some retail analysts are concerned the new push is too aggressive.

Starbucks risks losing brand appeal if it can be found anywhere and everywhere, Doug Stephens of Retail Prophet told Misonzhnik.

Four on Friday: Rick Carson of Weingarten Realty

As a vice president and senior regional director for Houston-based Weingarten Realty, a REIT that owns, develops and manages neighborhood and community shopping centers across the country, Rick Carson is a very busy man. Fortunately for us, he recently spared a few minutes to discuss his responsibilities at the firm, how he got into commercial real estate and his love of a good book.

HS: Give us a brief overview of your responsibilities at Weingarten.

Carson: I oversee Weingarten’s growth initiative for our eastern region, which includes the area from Washington D.C. through southern Florida. Our growth activities include the development of new retail assets, the acquisition and re-development/repositioning of under-utilized centers, and the pure-play acquisition of performing retail assets to add to our portfolio.

Within the region, we have offices in Atlanta; Raleigh, N.C.; Orlando, Fla.; and Ft. Lauderdale, Fla., with the strong possibility that we will add an office in Washington D.C. at some point. We have a significant portfolio in and around each of those markets, and each office is staffed with qualified associates representing all real estate disciplines including leasing, management, construction, development and acquisition.

HS: What initially drew you into a career in commercial real estate?

Carson: My education and early experience were in marketing and finance. I grew up in the finance industry, marketing and structuring leveraged buy-outs, mezzanine financing and the financing of high-growth companies. I also managed a portfolio of existing loans, and I enjoyed the multi-dimensional nature of those activities.

After several years of doing that, I was looking for an opportunity that provided the complex nature of marketing and finance with an entrepreneurial spirit of doing deals. Through a long-time personal friendship with Charlie Hendon, we met and figured out a way to combine my business skills — which admittedly did not include real estate — with Charlie’s desire to grow his company, Hendon Properties, and help him do so. It wasn’t as risky as it sounds because we had known each other for 20 years, and there was nothing (well, not much) on our resumes we didn’t already know and trust about each other. 

HS: If for some reason you couldn’t work in commercial real estate, what would you like to do? 

Carson: An interesting question and one that we’ve all wondered about during the past few years, given industry conditions. While I can’t imagine not doing something in commercial real estate, whether full-time or part-time, I think if all jobs paid the same, I would likely teach or coach. I’ve always enjoyed the coaching and training opportunities within the business environment, and I would likely try that in an academic setting. Coincidentally, I’ve been looking into opportunities to teach an evening class, and we’ll see where that goes.

HS: What was the last movie you saw and what's your favorite film of all time?

Carson: I tend to read much more than I go to movies. I go through periods of reading fiction for enjoyment, then I’ll feel guilty and switch over to something I feel I missed or need to know. I travel fairly often and usually have some type of mystery or detective book on my iPad, something by authors like David Baldacci, Michael Connelly, James Patterson and John Grisham. At the same time, I have a CD set about the Civil War in my car that I am listening to.

It’s a little bit like this business in which we find ourselves — there’s this constant struggle between doing what you’d like to do and doing what you need to do. The good news is that, most of the time, those two things overlap.

Additional Reading:

• Four on Friday: Charlie Hendon of Hendon Properties

The Wednesday Wrap: Dec. 5, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Apt. Building Boom Drives Recovery in Commercial Construction” by Randyl Drummer of CoStar.

Signs point to a significant increase in commercial and residential construction in most regions of the United States, led mostly by development in the multifamily and single-family housing markets, Drummer reports.

In October, builders started construction on the most homes and apartments since July 2008, according to the Commerce Department. Apartment construction rose 10 percent in October when compared to the preceding month. Furthermore, building permit applications for single-family homes rose to their highest level in more than four years in October.

The demand for building design services also saw a boost in October, with the Architecture Billings Index reaching 52.8 (anything above 50 indicates an increase in demand).

• “Fourth Quarter Retail Investment Sales Volume Promises a Spectacular End to the Year” by Elaine Misonzhnik of Retail Traffic.

The fourth quarter is looking to be an extremely strong period for retail investment sales, and this year’s overall transaction volume should represent a significant increase over last year’s, Misonzhnik reports.

In October, there was a 10 percent year-over-year increase in the sale of significant retail properties, according to Real Capital Analytics.

“Fourth quarter is looking outstanding for this industry,” Bill Rose of Marcus & Millichap Real Estate Investment Services told Misonzhnik. “It’s a combination of things: a) the Fed has engaged in quantitative easing for quite some time now and b) real estate is proving to be the favorable investment vehicle over bonds or equities.”

• VIDEO: “Storage, Lodging REITs Enjoy Strong November” by Carisa Chappell of REIT.com.

In this video clip, Brad Case, NAREIT’s senior vice president for research and industry information, discusses the impact of the holiday season on the retail REIT market. He also explains why the self-storage and lodging sectors had strong performances in November, and why mortgage REITs have performed weakly recently. Case also touches on the looming fiscal cliff.

• “Iowa Fields Attract Google” by Maura Webber Sadovi of The Wall Street Journal.

Google Inc. has just invested an additional $200 million in a $300 million data center under construction in Council Bluffs, Iowa, bringing the company’s investment in the state to more than $1 billion since 2007, Sadovi writes.

As the needs of Internet users grow, mega data centers have proven to be a fast-growing commercial real estate niche, Sadovi notes. John Boyd of the consulting firm Boyd Co. projects global annual investments in data centers and their equipment to rise to about $200 billion in two years, as growth in smartphones, apps and streaming video will increase demand.

Government incentives, low-cost power, cheap land and relatively predictable weather make rural areas like Iowa attractive for data centers, according to Sadovi’s report. Iowa was able to entice Google with a $9.6 million package of state-tax incentives.

• “Simon, Tanger to Partner on Two New Outlet Centers” by Robert Carr of National Real Estate Investor.

Simon Property Group and Tanger Factory Outlet Centers have partnered for two new outlet centers in Charlotte, N.C., and Columbus, Ohio.

Charlotte Premium Outlets is set to open in spring of 2014, and the Columbus center, being branded as Tanger Outlets, will open in time for the 2014 holiday season, according to Carr.

Tanger will provide site development and construction supervision for Charlotte Premium Outlets, while Simon will handle management services and marketing. Those roles will be reversed for Tanger Outlets in Columbus. Both firms will provide leasing services for the two centers.

Four on Friday: Mark Worley of Brixmor Property Group

A 20-year veteran of the retail real estate industry, Mark Worley is a senior vice president in Brixmor Property Group’s Southeast Region. In this position, he oversees 16 million square feet of community and neighborhood shopping centers in Georgia, Mississippi, North Carolina, South Carolina and Tennessee. Brixmor Property Group is the second-largest owner of community and neighborhood shopping centers in the United States, with approximately 620 properties totaling 96 million square feet in 39 states.

In this week’s Four on Friday, Worley details why he got into the commercial real estate industry and gives some valuable advice for those entering the sector.

HS: Give us a brief overview of your responsibilities at Brixmor and of the portfolio you oversee.

Worley: I currently oversee leasing, property management, legal matters and construction for the Southeast Region of Brixmor. The Southeast Region is responsible for the property operations in 90 shopping centers.

HS: We're in the midst of the all-important holiday shopping season. Do you think this shopping season will be a successful one for the retail sector?

Worley: Early indications are that it will be, but in keep in mind that our property type – community and neighborhood shopping centers – focus on providing everyday needs for our consumers.

HS: Tell us how you decided to pursue commercial real estate as a career and what you find most satisfying about it.

Worley: I decided to pursue a career in real estate as I was very drawn to sales coming out of college, and I had the opportunity to get into leasing at a very young age. I enjoy real estate as a career because no two days are ever alike, and I still enjoy the thrill of the deal.

HS: What's the best advice you could give someone just entering the commercial real estate sector?

Worley: Never take “no” for an answer, or you won’t make it very far in the industry.

The Wednesday Wrap: Nov. 28, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Equity Residential, AvalonBay to Acquire Archstone for $6.5 Billion” by Matt Valley of REBusiness.

Equity Residential and AvalonBay Communities Inc. have entered into an agreement with Lehman Brothers Holdings Inc. to acquire Archstone Enterprise LP for roughly $6.5 billion in cash and stock, Valley reports.

Equity Residential will acquire approximately 60 percent of the assets, and AvalonBay will acquire the remaining 40 percent. Equity Residential will get 78 properties located across the United States. AvalonBay will receive 66 apartment communities, nearly half of which are located in California.

Before the deal was announced, it was thought that Lehman Brothers Holdings would take Archstone public, Valley writes. However, Lehman is liquidating U.S. assets and ultimately decided on the quick sale.

• “Will a Rise in Homeownership Rates Hurt the Multifamily Sector?” by Bendix Anderson for National Real Estate Investor.

The bargain deals available in the for-sale housing market could soon entice renters faced with the increasingly higher costs of renting. However, as of now, many renters are too uncertain about the broader economy to make decisions on buying a home, Brady Titcomb of Jones Lang LaSalle told Anderson.

Young people who bought their first home during the housing boom were often hurt the worst when the market fell, Titcomb said, noting that Generation X homeowners suffered a 59 percent drop in net worth in the crash.

The median home price inched up in October to $178,700, according to the National Association of Home Builders, and the interest rate on the average mortgage fell to an extremely low 3.34 percent, according to Freddie Mac.

However, enticing home prices don’t make up for the fact that inventory is low, and it can be hard for would-be homeowners to qualify for a mortgage, Lawrence Yun of the National Association of Realtors told Anderson.

• “The Coffee Wars Continue” by Jennifer V. Hughes for Retail Traffic.

Starbucks, Dunkin’ Brands and McDonald’s continue to fight for control of the U.S. coffee market, and the net-lease assets and small strip centers that often house the stores are attracting big interest from real-estate investors, Hughes reports.

The latest financial statements show increases in revenue for Dunkin’ Brands and Starbucks, but McDonald’s saw a drop in third-quarter profits as the economy remains fairly weak, according to Hughes. However, all three companies are aggressively pushing to expand. Starbucks is looking to create more drive-through locations for its Seattle’s Best Coffee business and to add more Starbucks sites, while Dunkin’ plans to double its stores in the next 20 years, Hughes adds.

Regional chains like Gloria Jean’s and Peet’s Coffee and Tea are fighting an uphill battle to compete with the industry heavyweights, as developers will want to go with one of the well-known brands, Bill Rose of Marcus & Millichap told Hughes.

• “Affordable Seniors Housing Keeps Going Green” by Robert Carr of National Real Estate Investor.

Developers are finding it easier than ever to incorporate sustainability into affordable seniors housing projects, Carr reports. Costs have been cut as more eco-friendly suppliers have emerged, and the federal government is pushing for more sustainable buildings.

Affordable housing, including senior housing, is usually financed by public funds or nonprofit institutions, and those funding providers are more likely to support sustainable projects, Colin Edelstein of NorSouth Constructs told Carr. Some states even require green features before rewarding tax credits to affordable housing.

Because the rents are relatively low, developers of affordable seniors housing often look for moderately priced environmental features – such as high-efficiency heating and cooling systems – instead of costlier items like solar panels, according to Laura Weyrauch of Pathway Senior Living LLC.

• “VIDEO: Industrial Sector Climbing Back Up” by Carisa Chappell of REIT.com.

In this clip, Hamid Moghadam, chairman and co-CEO of Prologis, sits down during NAREIT’s REITWorld 2012 to discuss the drivers in the industrial sector, its strength and the impact of the supply chain on the sector.

The Wednesday Wrap: Nov. 21, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “Retail Industry Expecting the Strongest Holiday Season in Years in 2012” by Elaine Misonzhnik of Retail Traffic.

The retail real estate sector could be set for a very merry Christmas, Misonzhnik reports. “Judging by early forecasts, the 2012 holiday season might turn out to be the strongest in years, with preliminary surveys showing that consumers plan to spend more on gifts this year than they did in 2011,” she wrote.

In a recent survey conducted by the International Council of Shopping Centers and Goldman Sachs, 19 percent of the respondents said they planned to spend more on gifts this year than last, and 5 percent intend to spend substantially more.

A number of surveys say online shopping will again be a substantial component of holiday shopping this year. In a Discover Financial Services survey, 75 percent of respondents said they would research prices online before making a purchase. Deloitte also predicted that non-store sales — including online, mobile and catalog channels — will grow 15 to 17 percent this year.

Among one of the reasons for the widespread optimism is the fact Black Friday comes a week earlier than usual this year. Still, several retailers aren’t waiting that long to kick off the retail frenzy. Wal-Mart, Target and Sears are among the firms that have announced they will begin the shopping season by opening stores on Thanksgiving evening.

• “Economy Watch: Industrial Production Dips Due to Sandy; Thanksgiving Travel, E-commerce Rise” by Dees Stribling of Commercial Property Executive.

Industrial production in the United States decreased by 0.4 percent in October after increasing 0.2 percent in September, according to the Federal Reserve.

Hurricane Sandy’s lasting effects have resulted in reductions in the output of utilities, chemicals, food, transportation equipment and electronics. Industrial production would have increased during October if not for the storm, Stribling reports. Unemployment claims also spiked as a result of Sandy.

• “Retailers’ Preference for Strongest Locations Complicate Retail Property Recovery” by Randyl Drummer of CoStar.

While the multifamily, office and industrial sectors saw continued growth during the third quarter, demand for retail space remained lukewarm, according to CoStar’s Third Quarter 2012 Retail Review and Outlook.

U.S. retail properties absorbed only 7 million square feet in the third quarter. Large retailers are holding out for the only the best spaces for their new stores, opting in many cases for new space instead of vacant space in existing facilities, leaving the latter sites struggling to find tenants, Drummer reports. Consequently, asking rents are dropping across much of the available retail space, while landlords at shopping centers in prime locations have been able to push rents.

• “Miami Booms Like Never Before on Rental Demand: Mortgage” by Nadja Brandt of Bloomberg.

Hit hard by the recession, the real estate market in Miami is finally booming again, Brandt reports.

The average monthly rent for a two-bedroom apartment increased 6 percent (to $2,568) in the third quarter when compared with the same time last year, according to Condo Vultures LLC. “There’s a boom in Miami that we’ve never seen before,” Stephen Ross of Related Cos. told Brandt. “Miami is probably the hottest real estate market in the U.S. from a residential perspective.”

Most of the city’s unsold condos have been converted into rentals, and the number of multifamily developments is soaring, Brandt says. In other areas of the United States, investor interest in the multifamily sector is starting to wane as low mortgage rates persuade more people to buy homes.

Apartment rents are projected to rise through 2017, with a 4 percent gain nationally expected this year.

Four on Friday: ICSC Panel Featuring Ryan Rivera Examines Mixed-Use Retail

Above: Ralph Conti of Ra Co Real Estate Advisors, left, and Ryan Rivera of Hartman Simons after last night's ICSC Next Generation panel discussion on mixed-use retail.

Urban, mixed-use retail development was the subject of a comprehensive one-hour panel discussion featuring Hartman Simons’ Ryan Rivera that was held at Emory University last night. The discussion was part of the International Council of Shopping Centers’ (ICSC) Next Generation series of workshops; these events are designed to give younger retail real estate professionals the opportunity to network and learn more about the sector.

Ralph Conti of Ra Co Real Estate Advisors served as moderator. Other panelists included Mike Cohn of Cousins Properties, Kristen Morris of Jamestown Properties and Ron Pfohl of North American Properties (NAP).

In this edition of Four on Friday, we present four of the many topics the panelists discussed during the wide-ranging hour.

1) A Shift in Attitude.

Simply put, mixed-use properties in urban areas are becoming more prevalent because consumers, tired of long commutes to and from the suburbs, want walkable communities that afford them the opportunity to live, work, shop and play in the same general area, according to the panelists.

“The trend I see since the recession is that people are looking for something different,” Morris said. “They’re thinking, ‘What I was doing before is no longer acceptable.’”

2) The Difficulty of Financing.

Despite their growing popularity, mixed-use properties are still difficult to finance, in part because at least one of the property types included is bound to be in one of its non-peak cycles, the panelists noted.

Cousins Properties found that lenders imposed significant pre-leasing requirements for funding related to the retail component of Emory Point, a mixed-use property in Atlanta that Cousins developed in conjunction with Gables Residential; the property also includes apartments.

“Financing these properties is still an art,” Cohn said.

Furthermore, lenders are scrutinizing lease agreements much more closely than ever before, Rivera noted. “It’s much more cumbersome than it’s ever been,” he said.

3) Social Media.

Embracing social media channels such as Facebook and Twitter is a must for today’s retailer, the panelists agreed. NAP’s Atlantic Station in Midtown Atlanta has targeted Generation Y and has aggressively used social media to engage that demographic and draw foot traffic to the property, Pfohl noted. “We don’t spend a single dime on traditional media,” he added.

NAP has even used feedback from its online communities to make decisions about what tenants it should pursue and sign, Pfohl said.

4) Creating an Experience.

Considering the convenience afforded to consumers by online shopping, retail centers must give shoppers a reason to come to their properties. Pfohl said NAP has held more than 200 events – such as concerts and food-truck days – at Atlantic Station. “You’ve got to create a great experience for people,” he said.

“You have to bring people to your property for reasons other than just shopping,” Morris added. “It’s about building community.”

The Wednesday Wrap: Nov. 14, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Both Job Cuts and New Jobs Increased in October” by Mark Heschmeyer of CoStar.

Downsizing activity reached its highest level in five months in October, when planned job cuts increased by 41 percent when compared with the preceding month, according to a new report by Challenger, Gray & Christmas Inc. The automotive sector led the job cuts, with plans to trim 11,615 workers.

The U.S. economy did, however, add 171,000 net new jobs last month, according to the Bureau of Labor Statistics.

“The final three months of the year tend to see heavier downsizing activity as companies make year-end adjustments,” John A. Challenger of Challenger, Gray & Christmas told Heschmeyer.

Challenger, Gray & Christmas said there has been an uptick in retail hiring as the holiday season approaches, but noted employment gains in the sector were virtually unchanged from a year ago.

• “Echo Boomers Important Multifamily Driver” by Carrie Rossenfeld of Globe St.

The lingering effects of the housing crisis continue to push former homeowners into the rental market, while Echo Boomers are helping boost the sector’s fundamentals as well, Rossenfeld reports.

The Echo Boomer generation of 95 million is transitioning into the workforce and looking for new product in A+ locations, Jeff Meyers of Meyers Research told Rossenfeld.

The national occupancy rate rose to 93.9 percent in the third quarter, and Meyer says the rate will continue to rise in the short term. He also says demand for Class-A+ properties should increase as well.

• “Slow Growth in U.S. Office Sector” by Carisa Chappell of REIT.com.

While office REITs are underperforming when compared with the REIT sector as a whole, they are enjoying much stronger returns than they were one year ago, Chappell reports.

Year-to-date total returns for office REITs as of Nov. 8 were 12.63 percent versus 1.9 percent during the same period last year, according to data from the National Association of Real Estate Investment Trusts.

The office sector currently has its lowest vacancy rate since the end of 2009, according to Jason Lail of SNL Financial. Citing data from REIS, he also noted that national asking rents grew from $28.17 per square foot to $28.23 per square foot in the third quarter on a year-over-year basis.

Overall, though, third-quarter office REIT earnings provided “mixed to disappointing news,” said Michael Knott of Green Street Advisors. Knott says a lack of tenant confidence is a continuing problem for the sector.

• “Home Depot Profit Tops Estimates as Housing Market Heals” by Chris Burritt of Bloomberg.

Home Depot posted a higher-than-expected third-quarter profit as the retailer benefitted from the recovering U.S. housing market, Burritt reports.

New-home sales are occurring at their fastest pace in two years, and construction starts have reached a four-year high, according to Burritt.

Home Depot stores saw customers visit more often and spent more per trip. The average transaction value in the third quarter rose 2.9 percent to $54.55, and the number of purchases climbed 1.7 percent to 331 million.

In addition to the impact from the improving housing market, Hurricane Sandy provided a boost in sales to home-improvement retailers, Burritt adds.

• “Hotels Predict Revenue Lost to Storm Can’t Be Recouped” by Kris Hudson of The Wall Street Journal.

Hoteliers are predicting they won’t be able to recoup revenue and bookings lost during Hurricane Sandy, Hudson reports.

Many hoteliers say cancellations are outpacing bookings from stranded guests and recovery workers, and little of the revenue lost from canceled conferences is expected to be reclaimed through insurance.

“For the most part, this will be lost business that you're never going to get back,” Ray Martz, chief financial officer of Pebblebrook Hotel Trust, which owns nine hotels affected by Sandy, told Hudson.

Hotels often avoid enforcing penalties on groups that cancel events as those groups might later refuse to host additional events at those facilities, Hudson writes.

The Wednesday Wrap: Nov. 7, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “CRE Industry Takes Stock of Hurricane Sandy Damage” by Mark Heschmeyer of CoStar.

Commercial real estate firms have begun to release estimates of the property damage caused by Hurricane Sandy in the Mid-Atlantic and Northeast last week.

Insurance risk modeling firm Eqecat Inc. estimates the initial insured loss between $10 billion and $20 billion with an additional $30 billion to $50 billion in total economic damage.

Because the storm was so widespread, this number could change as experts adjust their estimates, Heschmeyer notes.

There also will be significant business interruption losses because of the power outages and flooding that have plagued the areas hit by the storm.

Many commercial real estate firms have had to close business for a number of days, and some – like Ambac Financial - were forced to relocate; Ambac has moved its headquarters from New York City to Kingston, N.Y.

• “Multifamily Market Fundamentals’ Improvement Slows” by Carisa Chappell of REIT.com.

Data released at the end of October shows apartment market conditions have improved for the seventh consecutive quarter, but the pace of improvement has slowed, according to the National Multi Housing Council (NMHC).

High occupancies and increased rental rates have come at a more moderate pace, according to NMHC’s quarterly survey of executives with apartment-related firms. Only 25 percent of respondents reported tighter rental markets, versus 55 percent in the previous quarter, and 14 percent reported a looser market.

• “Are Traditional Grocers in Trouble? Three Innovative Chains Say Yes” by Susan Piperato of National Real Estate Investor.

Grocers must be fiercely competitive in today’s market to survive, according to executives from Trader Joe’s, Aldi and Walgreens who were part of a panel discussion at last week’s National Net Lease Investment Conference.

The trend of traditional grocers acting as anchor stores for shopping centers is changing as companies ranging from drugstores to gas stations have begun to offer groceries, the executives noted.

The economy has forced consumers to be more discerning and to shop around for the best price, which has caused havoc for traditional grocery stores, said Michael F. Mallon of Mallon and Associates Inc.

Trader Joe’s continues to open an average of 25 to 30 new stores per year, focusing on highly concentrated urban areas with educated households.

Aldi has seen its business model change; the company used to take corner locations in low-income and moderate-income areas, but now it is looking for freestanding locations in central areas, Mallon said.

Walgreens has joined a number of non-traditional grocers in offering grocery items and continues to build more stores at any size, according to its vice president of real estate, Michael Krasucki.

• “College Housing Firms Aim Upscale” by Dawn Wotapka of The Wall Street Journal.

Public companies are trying to break into the student-housing market by offering students tired of dorm life private rooms and bathrooms as well as plenty of amenities, Wotapka says.

The industry is seeing growth in cottage-style housing — upscale houses with bedrooms dotted around gourmet kitchens, according to Wotapka.

Developers increasingly are interested in student housing because more than 3 million high-school students are expected to graduate annually until 2018-2019, and universities experiencing budget cuts aren’t supplying enough beds to keep up with the influx of students, Wotapka writes.

• VIDEO: “Uncertainty Impacts Investors in October” from REIT.com.

In this clip, Brad Case, senior vice president of research and industry information at NAREIT, talks about the impact of Hurricane Sandy on REITs. He also explains how uncertainty caused by the presidential election played a big part in the “soft month” experienced by REITs in October.

Hartman Simons' Ryan Rivera to Be Part of Upcoming ICSC Panel Discussion on Atlanta Retail

The factors shaping the current state and the future of retail real estate in Atlanta will be the subject of an upcoming panel discussion at Emory University that will feature Ryan Rivera of Hartman Simons.

“Shop Atlanta: What Shapes Our Retail?” will be held on Thursday, Nov. 15, from 6:30 p.m. to 9 p.m. at Emory University’s Goizueta Business School. The panel discussion is part of the International Council of Shopping Centers’ (ICSC) Next Generation series of programs; these events are designed to give younger retail real estate professionals the opportunity to network and learn more about the sector.

According to the event description, the upcoming retail panel discussion “will provide a unique opportunity to obtain valuable insight on the good, the challenged, and the exciting opportunities that are helping shape the future of retail in Atlanta.”

In addition to Rivera, the panelists will include Mike Cohn, executive vice president of Cousins Properties Inc.; Kristen Morris, vice president of Jamestown; and Mark C. Toro, managing partner of North American Properties. Professor Roy T. Black, director of the Goizueta Business School’s real estate program, will be the moderator.

Hartman Simons and Weingarten Realty are sponsors of the event.

Tickets are $25 for ICSC members and $40 for non-members if purchased by Nov. 14. Prices increase to $40 for members and $55 for non-members after that date. To register, visit here.

The Goizueta Business School is located at 1300 Clifton Road. The panel discussion will be held in Room GFC 525.

The Wednesday Wrap: Oct. 31, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Hurricane Delays Nearly $3 Billion of Commercial Mortgage Bonds” by Al Yoon of The Wall Street Journal.

Wall Street dealers delayed pricings of almost $3 billion of commercial mortgage-backed securities (CMBS) as Hurricane Sandy closed financial markets in the United States early this week, Yoon reports.

The delays come during a period of increased demand for CMBS. “This will be a minor interruption,” Christopher Sullivan of United Nations Federal Credit Union told Yoon. “There’s nothing that should affect investor sentiment."

This month has been the busiest one for CMBS issuance since 2007, according to J.P. Morgan analysts, with $7 billion of CMBS priced or announced so far. Transactions should be tough to complete for a few days, however, after the early week closures of the bond markets, Yoon writes.

• “Hurricane Sandy Threatens November Retail Sales” by Sapna Maheshwari and Renee Dudley of Bloomberg.

In the aftermath of Hurricane Sandy, clothing and holiday-gift sales could dip next month, but supermarkets and home-improvement stores will benefit from the storm, the authors report.

November same-store sales could drop as much as 3 percent, according to Oliver Chen of Citigroup. Foot traffic could fall 40 percent in affected areas during the first week of November, Chen added.

Supermarkets and home-improvement stores benefited from those stocking up on supplies.

Many retailers along the East Coast were forced to close stores before the storm hit, and the loss of activity will be hard to make up, according to Mark Vitner, economist at Wells Fargo.

Retailers also face possible inventory shortages if trucks are unable to deliver goods due to flooded roads, Maheshwari and Dudley report.

• “Office Market Recovery Continues in Third Quarter Despite Election Year Jitters” by Randyl Drummer of CoStar.

After an unimpressive start to 2012, demand for office space continues to pick up momentum, according to CoStar’s “Third-Quarter 2012 Office Review & Outlook.”

The low levels of new office construction helped the national vacancy rate drop slightly to 12.6 percent in the third quarter, and net absorption rose from 13 to 15 million square feet during that time. However, rents in most markets have not increased.

CoStar’s Walter Page said he originally expected demand to fall a bit in the quarter based on uncertainty surrounding the economy and the upcoming election, but now expects demand to hold as job growth improves.

• “Housing Shortage to Benefit Coastal Apartment REITs” by Carisa Chappell of REIT.com.

Apartment REITs, especially those with properties near the coast, will benefit from a predicted housing shortfall of 1 million homes annually over the next few years, according to Jonathan Litt of Land and Buildings Investment Management LLC.

Starts on new multifamily properties are 60 percent below the units needed to keep up with demand, a good thing for apartments already on the market, Chappell reports.

REITs with a high concentration of apartments on the coasts can especially capitalize on the housing shortage because these areas feature stronger household income growth, limited new construction and high cost of homeownership, allowing landlords to push rents.

• “Survival of the Fittest Starts to Play Out in the Office Supplies Sector” by Elaine Misonzhnik of Retail Traffic.

Big-box office supply retailers are in trouble, Misonzhnik reports.

Today’s consumers need less paper and paper-related products as new technologies emerge. Given these dynamics, the market has too many competitors, according to Doug Stephens of Retail Prophet. He expects at least one retailer to consolidate or leave the market.

Staples has already announced plans to close 290 of its North American stores, Misonzhnik notes. However, Staples is currently the market leader and the least likely to go under, according to Liang Feng, researcher with Morningstar. 

Staples is working to adapt to the new retail environment, cutting retail square footage, linking physical and electronic channels, and working on cutting costs. But Office Depot and OfficeMax are seeing falling same-store sales, Misonzhnik writes.

The Wednesday Wrap: Oct. 24, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “U.S. Retail Sales Increase for Third Straight Month” by Tim Trainor of CoStar.

Recent economic reports are showing more signs of a gradual economic expansion in the United States, according to Trainor. A new Census Bureau report says the country’s retail sales totaled $412.9 billion in September, the third straight month of increasing sales.

Retail sales from July through September were higher than economists had expected, Trainor adds. 

Other encouraging news includes the drop in the unemployment rate to 7.8 percent after the addition of 114,000 jobs, although many of the jobs added were part-time positions, Trainor reports.

Good signs in the real estate sector include positive numbers in home starts, building permits and construction activity (not including the Northeast), and home sales.

• “More Robust Commercial Real Estate Recovery Projected for 2013” by Carisa Chappell of REIT.com.

Those in the commercial real estate industry are optimistic about its recovery next year as the job market seems to be improving and new construction has been limited, according to the new “Emerging Trends in Real Estate 2013” survey from PricewaterhouseCoopers (PwC) and the Urban Land Institute.

Survey respondents said there should be gains in leasing, rental rates and pricing for all real estate sectors, and also noted that newly added jobs should increase absorption and push down vacancy rates in the industrial, office and retail sectors.

Optimism about commercial real estate could increase investment in the industry as other types of investments struggle, Mitch Roschelle of PwC told Chappell. Investors are also expected to take on more risk in their real estate portfolios, including in secondary and tertiary markets, according to the survey.

• “Are Rising Rents Too Much of a Good Thing?” by Bendix Anderson for National Real Estate Investor.

Apartment rents are rising faster than inflation, meaning more profits for real estate investors, but the trend also comes with risk, Anderson reports.

“Landlords need to be careful,” Brad Doremus of Reis told Anderson. “They can’t raise rents forever if they come up against that budget constraint.”

Competition exists from new rental housing, cheaper rental housing and for-sale housing, making sky-high rents unattractive, Anderson notes.

According to a new report from the Center for Housing Policy and the Center for Neighborhood Technology, the cost of housing rose 52 percent between 2001 and 2010, while household incomes only rose 25 percent in that time.

Transportation costs also rose dramatically in that time, but that could make an apartment community in a place with less expensive transportation more attractive, Scott Bernstein of CNT told Anderson.

• “Traditional MOB Is Becoming Obsolete” by Carrie Rossenfeld of Globe St.

Healthcare reform is coming, and that means a dramatic change for the medical-office sector, according to Gary McKitterick of law firm Allen Matkins.

Specifically, McKitterick believes the traditional medical-office building will soon become outdated. “Providers are reducing cost by pushing services out of the hospital — the highest cost point for delivery — into an outpatient setting,” he told Rossenfeld. “From a real estate perspective, you need to understand what your local hospital is doing to push services out.”

Sanford Smith of Hoag Memorial Hospital Presbyterian says the industry needs to deconstruct the hospital and take out services that would be better located in the heart of a community.

Other innovative ideas in the medical industry that could greatly affect real estate include the idea of time-sharing spaces between multiple physicians and “medical pods,” locations to which doctors travel to see outpatients instead of patients coming to them.

• “Why Pier 1 Is Choosing Bricks over Clicks — and Winning” by Lydia Dishman of Forbes.

The CEO of retailer Pier 1 Imports, Alex Smith, isn’t completely sold on the idea that e-commerce is better, telling Dishman his company offers the experience of seeing a product in person with great service.

Smith is using funds to improve Pier 1’s physical stores through remodels, relocations and merchandising fixtures set up to better display products and keep customers lingering in the store, according to Dishman.

Pier 1 is not totally turning its back on e-commerce, also choosing to focus funds on its website, which was re-launched in July after being shut down five years ago.

“We are trying as much as we are able online to replicate the in-store experience,” he told Dishman.

Four on Friday: Charlie Hendon of Hendon Properties

The president of Hendon Properties, retail developer Charlie Hendon is known throughout the commercial real estate industry as a serious music fan. In fact, his Hendon Rocks party, typically held during the ICSC’s annual national convention in Las Vegas, has become one of the retail real estate sector’s most well-known events. In the past, members of .38 Special, Cheap Trick, The Romantics and Rolling Stones keyboardist Chuck Leavell all have played at the show.

We recently got a chance to talk with Charlie about next year’s show, his love of music and how his firm has fared during the real estate downturn.

HS: Are you planning another Hendon Rocks for next year and, if so, do you have any news on who will be playing?

Hendon: I am planning a party for the upcoming May ICSC. I have a very special guest in the works, but as it is not confirmed yet, I cannot make an official announcement.

HS: Who are some of your favorite all-time musicians?

Hendon: My sons, Elton John, Sting, John Mellencamp, The Stones, Chuck Leavell, Leon Russell and Stone Temple Pilots.

HS: If you had to pick only one album to take to that proverbial deserted island, what would it be?

Hendon: Tough question but I guess “Tumbleweed Connection” by Elton John.

HS: What kind of year has 2012 been so far for Herndon Properties? What are some of the development projects that you have in the works?

Hendon: The last four years were very difficult, and 2012 has been as well. That said, we have survived and gotten through the tough legacy issues.

We are starting a ground-up development this year, which is very encouraging. We are developing a center in North Charleston, S.C., that will be anchored by Harris Teeter, Marshalls, Rack Room and Pet Supplies Plus. We are in the works on a major redevelopment of one of our assets, and we see 2013 as a new beginning, a “breakout” year.

The Wednesday Wrap: Oct. 17, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Trouble in the Heartland? Rapid Rise in Farmland Values Poses Risk for Investors and Ag Lenders Alike” by Mark Heschmeyer of CoStar.

Farmland has seen a major increase in investor interest over the past two years as buyers look for higher returns, according to Heschmeyer.

Stocks are not getting the double-digit returns they did in the 1990s and 2000s, making a 7 to 9 percent returns on farmland investments more attractive to today’s investors, Jamie Shen of Callan’s Real Assets and Alternative Investments told Heschmeyer.

One factor in farmland’s attractiveness is supply and demand, according to Callan’s research. As the global population continues to rise, it’s likely that demand for land and agricultural goods will also increase.

• “REITs Relying on Technology, Sustainability to Enhance Returns” by Carisa Chappel of REIT.com.

The economic slowdown has hindered traditional growth for REITs, so now they are looking toward technology and sustainability to grow their businesses and save money, according to a new report by Deloitte.

REITs are increasingly embracing technology like cloud computing, mobile applications and social media to reach new customers. They are also turning to more sustainable practices, which can improve the bottom line and stock performances, according to Bob O’Brien of Deloitte. REITs with well-executed green strategies are outperforming other REITs, he noted.

Economic uncertainty, lack of job growth, the U.S. deficit and the European debt situation all have stymied the U.S. real estate industry, O’Brien told Chappel.

• “Online Stores Are Moving into the Real World” by Jessi Hempel of CNN Money.

For a while now, traditional brick-and-mortar retailers have fought for strong online presences to compete with online retailers like Amazon. Now, the trend is reversing, as digital brands attempt to open physical locations as well, Hempel reports.

Examples include BaubleBar, a popular online jewelry seller, which is opening a showroom at its corporate headquarters in Manhattan. The firm plans to open boutiques nationwide that cater to an area’s specific tastes.

There’s also glasses-maker Warby Parker, which has followed suit with showrooms in nine cities and has a retrofitted school bus that acts as an on-the-go store by traveling the country.

It’s even rumored that Amazon may be considering a physical store as well, Hempel notes.

• “Store-Within-a-Store Becomes Expansion Model Dujour” by Elaine Misonzhnik of Retail Traffic.

Retailers are increasingly looking at opening locations within larger stores as a means to cut construction costs and increase flexibility, according to Misonzhnik.

Finish Line plans to open 450 stores inside Macy’s locations, and a number of boutiques are scheduled to open soon within JC Penney stores, Misonzhnik reports.

There is currently no standard for calculating rent for stores within stores, Misonzhnik writes, and in some cases the rental rate could be higher than for equivalent standalone stores. However, a retailer who opens a store-within-a-store has instant access to foot traffic and often has a lease that’s shorter than the standard 10-year term, making it worth the premium in rent, Lew Kornberg of Jones Lang LaSalle told Misonzhnik.

The department stores that are willing to let a store open within theirs are also benefiting because doing so allows them to expand without all of the traditional added costs and risks, according to Matt Winn of Cushman & Wakefield.

• “Here’s a Way to Cut Business Taxes: Tech Firms Become Real Estate Trusts” by Anton Troianovski of The Wall Street Journal.

Some technology companies like American Tower Corp. and Equinix Inc. are looking to convert them to real estate investment trusts (REITs) in an effort to avoid paying taxes, Troianovski reports.

As more companies have pushed to be considered REITs, the total market value of REITs has grown from $9 billion in 1990 to $451 billion in 2011, according to the National Association of Real Estate Investment Trusts.

Some in the real estate industry are worried about the potential political backlash of companies taking advantage of the REIT structure. The IRS has said “inherently permanent structures” like cellphone towers, billboards and data centers qualify for REIT treatment, according to Troianovski.

PHOTOS: ICSC Georgia Political Action Committee's Annual Fundraiser

Hartman Simons was a proud sponsor of the ICSC Georgia Political Action Committee's annual fundraiser, held on Tuesday, Oct. 9, at Cinco Mexican Cantina in Cobb County. The event was held on the eve of the ICSC Southeast Conference.

We have compiled a photo album of the evening. Below are a few photos from the event:

(Above, from left): Hartman Simons Managing Partner Summey Orr, Jenny Evans of The Home Depot and Heather Darden of RaceTrac enjoyed the chance to visit.

(Above:) Steve Spiegel of Hendon Properties (left) and Benno Rothschild (right) of Hartman Simons were among the attendees of the 2012 ICSC Georgia PAC fundraiser.

(Above:) Michael Aide, vice president of real estate for AmREIT (left) and Peter Hartman of Hartman Simons (right) enjoy the evening's festivities.

To view the entire album, click here.

Four on Friday: Peter Hartman on the 2012 ICSC Southeast Conference

It’s been busy week for us here at Hartman Simons. After our firm co-sponsored the annual fundraiser for the ICSC Georgia Political Action on Tuesday, many of our attorneys spent the following days at the annual ICSC Southeast Conference, held at the Cobb Galleria Centre. Two of our lawyers – Bob Simons and Benno Rothschild – moderated panel discussions at the show.

After the show ended, we had a chance to talk briefly with Peter Hartman to get his take on where the area retail sector stands after the ICSC show.

What was the overall mood at the ICSC Southeast Conference, and how did that compare to the past several years?

Hartman: Very positive and much more optimistic than the past several years.

Broadly speaking, after observing the industry this year and attending the conference, what's your take on how the retail sector is performing in the Southeast in terms of investment sales, leasing activity and development? 

Hartman: It seems that the volume of transactions are up substantially and for the first time in probably four years, there are ground-up projects being planned and leased.    

What types of properties – urban or suburban – are retailers seeking the most right now?

Hartman: With a few exceptions (e.g., Avalon in Alpharetta, Ga.), most of the new deals seem to be in more urban in-fill locations.   

Gaze into your crystal ball for just a second: In what shape will the southeastern retail sector be in the fall of 2013, when the next ICSC Southeast Conference is held? 

Hartman: I think that if the mood and economic news continue to improve, next year could be very active in retail real estate.

The Wednesday Wrap: Oct. 10, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Apartment Performance Slowed in Q3” by Carisa Chappell of REIT.com.

Momentum in the apartment sector is slowing, and the office and retail sectors are still performing sluggishly, according to a new third-quarter report from Reis.

The national apartment vacancy rate saw its slowest improvement since the recovery began, only dropping from 4.7 percent to 4.6 percent in the third quarter.

The weak labor market has impacted the apartment sector, Ryan Severino of Reis told Chappell. Severino pointed out that job creation has been concentrated in lower-wage occupations, a dynamic that is affecting the ability of 20- to 34-year-olds, the drivers of apartment demand, to afford higher rents.

The job market also is affecting the office sector, with absorption rates and vacancy rates only improving slightly. The retail sector stalled in the third quarter, with regional and super regional malls outperforming neighborhood shopping centers, according to Severino.

• “Class-C Apartments Strengthen” by Bendix Anderson for National Real Estate Investor.

Even as apartment growth slows, effective rents at Class-C apartments are growing faster than those at Class-A and Class-B apartments, according to a new report from Axiometrics.

“We call it the ‘filling-in’ effect,” said Jay Denton of Axiometrics. “Now that occupancies are getting better, Class-Cs are getting some pricing power.”

Average effective rents for Class-C apartments rose 4.1 percent over the last year; in Class-A apartments, they rose 3.7 percent.

Still, while class-C apartments did better in thriving markets like Dallas, they remain weak in markets like Atlanta, Anderson noted.

• “Wal-Mart Tests Same-Day Delivery” by Stephanie Clifford of The New York Times.

Taking a cue from Amazon.com, Wal-Mart is testing same-day delivery at a few of its locations, trying to combine the ease of online ordering with the instant results of shopping in person, Clifford writes.

Wal-Mart’s more than 4,000 local stores, which can act as distribution centers, put it at an advantage over other retailers in offering same-day delivery, Clifford notes.

The tests are in addition to same-day grocery delivery that the retailer has been testing in San Jose, Calif., and San Francisco.

• “Midwest Markets Are on the Mend, But Closing Deals Is No Easy Feat” by Elaine Misonzhnik of Retail Traffic.

Market conditions are improving in the Midwest, but landlords and property investors still have to work extremely hard to close deals, according to attendees at the ICSC Chicago Deal Making conference.

With limited new development and a slowly improving economy, retailers are actively looking for new locations, according to Daniel Taub of DLC Management Corp. But their interest is largely confined to Class-A space in urban cores.

Memories of the recession also have landlords checking prospective tenants’ financials more closely, according to Ginger L. Benz of Cullinan Properties.

Four on Friday: Duke Long of The Duke Long Agency

Broker Duke Long, owner of The Duke Long Agency in Indianapolis, has one of the commercial real estate industry’s most visible online presences. On his website – which bears the tagline “Commercial Real Estate with a Little Attitude” – and in his Twitter feed, he offers an often acerbic take on the sector. He also has appeared at real estate conferences nationwide to discuss such topics as social media, marketing and content creation.

We recently got a chance to discuss with Long the commercial real estate industry’s use of technology, his tips for brokers entering the field … and his driving skills.

HS: What's your overall assessment of how well the commercial real estate industry has integrated social media and other online technologies – what's it doing well and what’s it doing poorly?

Long: My general assessment is that the integration is about fair. There is still a lot of talk about what we really should be doing. The number one issue is still defining what the real return on investment (ROI) is for any digital media. I have one simple question for everyone. Tell me the real ROI on your mom. Seriously. Tell me. I will wait.

OK – maybe that is stretching it a bit far, but the entire world uses digital media everyday, and we do not need to only define a digital strategy by dollars. In my opinion, the most dynamic use of digital media is occurring in the retail sector. It crosses all platforms, and it’s breathtaking to watch the innovation and adoption. Sadly, the most discouraging segment is brokerage, which too often is ignorant and embedded in a “worst practices” mentality – and, of course, damn proud of it.

HS: If you were speaking with someone about to enter a brokerage career, what advice would you give them about how to best succeed in this day and age?

Long: First and foremost, find a mentor. Unfortunately, the good ones are few and far between. The second thing is to define the market and segment that you want to dominate. Example: Chicago downtown retail. Walk that market and literally know every building, owner and tenant and be able to answer any question about that market in your sleep. The third thing is tools, both online and off. Get a set of 10: customer relationship management (CRM) software, mapping software, etc. The final thing is relationship building. Be in front of a potential client every single day, and nurture that relationship.

HS: Your website has a poll asking readers about their preference in the presidential election. Do you think the race is having an effect – good or bad – on the commercial real estate sector, and how much of an impact do you expect the outcome to have?

Long: In all honesty, I don’t think it will matter one little bit, and that in and of itself is a sad statement.

HS: If you weren't a broker, what career would you want to pursue?

Long: Easy: racecar driver. Formula One, IndyCar or NASCAR. I am a graduate of Speedway High School. Unfortunately, I have a “checkered” driving record to prove that my “skills” are still as sharp as ever.

Connect with Duke on Twitter, LinkedIn and Google+, and check out his website at DukeLong.com.