Originally published in the Fall 2022 Issue of NAIOP's Development Magazine by Plabo J. Quintana.

The modern office is in the midst of a transformation. With most knowledge workers opting out of the traditional five-day-in-office workweek in search of flexibility and hybrid work solutions, the shape, size and focus of the future office is rapidly changing.

CBRE’s Spring 2022 Office Occupier Sentiment Survey provides a snapshot of these changes and their impact on commercial real estate. In a survey of 185 tenant companies, 39% of respondents said they plan to expand their office portfolios over the next three years. That’s up from 29% the previous year, suggesting that fears about the “death of the office” have been exaggerated. Fifty-two percent said they plan to reduce their office space holdings, but only 8% say they will become fully remote. Seventy-three percent — the vast majority — plan to support hybrid work. 

As of now, office occupancy is slowly beginning to rebound from the depths of the COVID-19 pandemic. NAIOP’s Office Space Demand Forecast, released in May, reports that vacancy rates have increased across the country for 10 straight quarters. However, Class A buildings with amenities designed to attract skilled workers are helping to stabilize the office market. Net office space absorption in the remaining three quarters of 2022 is forecasted to reach 46.9 million square feet and total 47.3 million square feet for all of 2023.

Originally published in the Fall 2022 Issue of NAIOP's Development Magazine.

The Morton Salt Company warehouse on Elston Avenue in Chicago once furnished tons of preservative salt for the city’s tanning industry. Today it is itself preserved — a city landmark in the process of rebirth as a concert venue combined with commercial and office space.  

The complex, containing several buildings in a 4.2-acre site along the North Branch of the Chicago River, is being transformed to contain a 30,000-square-foot indoor concert venue in the former salt storage shed, 60,000 square feet of leasable office and commercial space in what had been a three-floor packaging building, additional space in a former garage, and an outdoor performance venue in the footprint of a recently demolished second salt shed.

The site is in the city’s North Branch Industrial Corridor, which has seen considerable development since partial rezoning in 2017 to encourage mixed-used development. The zoning of this site changed from M3-3, Heavy Industry District, to C3-3, Commercial, Manufacturing and Employment District.

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The Transportation, Planning, and Development Committee held its first meeting of the new council term and reviewed its charge and procedures.  Members of the Committee, along with Mayor Pro Tem Braxton Winston who also attended, heard several presentations from planning staff that included:

• Community Area Planning, Alignment, and Rezoning
• UDO Implementation

• Meeting Agenda - October 3, 2022
• Meeting Video - October 3, 2022

Originally published in the Fall 2022 NAIOP Development Magazine by Ron Derven.

Since its founding in Dallas in 1991, Granite Properties has understood the impact of real estate developments on people and communities. That’s why it creates spaces and relationships where people can flourish while supporting local communities.

For its outstanding quality of products and services, financial stability, ability to adapt to market conditions, support of NAIOP, and support for the communities where it works, Granite Properties is NAIOP’s 2022 Developer of the Year.

“This award is recognition from our peers that not only are we doing good things, but we are doing them in a way that benefits all of our constituencies,” said Michael Dardick, CEO of Granite. “What makes it even more special is that it comes from NAIOP, a prestigious industry group.”

Inflation is expected to remain around 8% for August according to Bloomberg. While this may be slightly lower than the 8.5% consumer price index recorded in July, the continued rise in inflation from a year ago increases the cost of providing and maintaining government programs and services at the local level. The National League of Cities has reported that cities are using federal pandemic relief funds to address the impact of inflation.

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Originally published on September 20, 2022, by Maria Gatea for NAIOP Blog.

E-commerce provides easy access to goods with the click of a button, filling homes with stuff, stuff and more stuff. Meanwhile, the trendy minimalist lifestyle emphasizes only keeping what is needed and eliminating everything else. Where does the average American end up on the spectrum of goods ownership? As it turns out, among apartment renters, one in five uses self-storage to manage their belongings, at least temporarily.

Self-storage is a rapidly developing service that assists in life events such as moving, downsizing, or changes in family size. More recently, the widespread need to create home offices with the rise of working from home during the COVID-19 pandemic has added to the traditional sources of demand for self-storage. Renters, in particular, are finding more use for storage away from home as they move more often, and apartments are generally smaller. On average, renter-occupied homes in the U.S. are smaller than owner-occupied homes by largely 800 square feet. As a result, many renters are using self-storage as an extension of their homes.

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Originally published by Jenna Glick in the Summer 2022 Issue of NAIOP's Development Magazine.

A new organization aims to simplify the process of procuring real estate suppliers from historically under-represented groups.

The lack of diversity in the commercial real estate industry has been under increased scrutiny for the past few years. Some of the largest companies in global real estate made it a priority, such as Blackstone appointing a global head of diversity, equity and inclusion (DEI) in June 2021 and CBRE hiring a chief responsibility officer in 2020. Cushman & Wakefield named its first chief DEI officer in December 2020, and JLL expanded its internal team dedicated to DEI initiatives.

Inclusion initiatives focused on sourcing and fostering diverse talent are widely recognized, but they are only part of the equation. Another component involves supplier diversity and inclusion programs that leverage corporate purchasing power.

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Originally published in September 2022 by Christopher De Sousa, Ph.D., MCIP, RPP, Professor, School of Urban and Regional Planning, Toronto Metropolitan University for NAIOP.

Former industrial sites and other properties that may be contaminated — commonly called brownfields — can be found across the United States and Canada. Brownfields are often adjacent to well-developed transportation infrastructure, and many are near urban centers. These locational advantages make many brownfields viable targets for redevelopment to new uses, but the costs and risks associated with environmental remediation often make these redevelopment projects impossible without public financial and regulatory support. For this reason, public-private partnerships involving multiple levels of government, nonprofit organizations and private developers have played a prominent role in brownfield redevelopment. Public support for these projects has long been tied to achieving social and economic goals such as increasing employment, revitalizing communities and strengthening local real estate markets. In recent decades, public-private partnerships have also prioritized environmental objectives, from green building design to renewable energy and ecological revitalization.

Social, economic and environmental sustainability are now key considerations for most brownfield redevelopment projects backed by public-private partnerships. Even developers who pursue brownfield projects without public subsidies may find it beneficial or necessary to pursue sustainability objectives to obtain necessary entitlements and community support.

Full Report

Originally published by Robert Dunphy in the Summer 2022 NAIOP Development Magazine Issue.

As workers return to offices and shoppers return to stores, new parking strategies may emerge.

The COVID-19 restrictions that began in March 2020 led to business closures and a sharp cutback in personal travel that caused demand for parking to plummet. Except for curbside pickup of retail purchases and carry-out meals, most travelers stayed home and avoided commercial and private parking lots and on-street spaces.

In April 2020, passenger travel on roads declined by 60%, while public transit usage fell by 81%, and air travel slumped by 96%, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics. It was not until the spring of 2021 that passenger car travel returned to 2019 levels on average, but with wide variations across the country.

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By Linda Strowbridge 

Growing convergence between the retail and distribution sectors could have profound impacts on the commercial real estate industry. As retail and industrial clients adjust to shifts in consumer behavior and the overall economy, CRE professionals will be challenged to change their thinking about how to truly serve their clients. That challenge, however, could also produce innovative real estate products and new opportunities. That’s according to Dustin C. Read, Ph.D./J.D., author of the NAIOP Research Foundation report, “New Places and New Spaces for E-commerce Distribution: Three Strategies Bringing Industrial and Retail Real Estate Closer Together.”

What was the most interesting or significant discovery you made while researching the paper?

Read: It was probably that some of the most important phenomena related to the convergence of industrial and retail real estate were the ones that received the least attention. In the popular press, there has been lots of discussion of the conversion of obsolete retail buildings into distribution facilities. When you really drill down – even though there have been hundreds of articles written on that topic – the number of [these retail-to-distribution conversion] projects that have been successful in the U.S. is relatively small. I was surprised to see when you really start pulling back layers of the onion, there is more talk about it than there is actual execution of those types of projects.

The amalgamation of all the obstacles a developer must overcome to do one of these projects successfully is significant. The project has to be acquired at a relatively low purchase price and have the right access to infrastructure. It must be in a market that has good industrial characteristics and an area where the municipality has given up on the site as a viable retail location and is willing to rezone it for potential distribution. When all those things come together at the same time, there are opportunities for conversion. But often, they don’t all come together.

By Trey Barrineau

Industrial properties are often built near neighborhoods, but that isn’t always popular with the residents, who have legitimate concerns about noise, traffic and pollution from the increased volume of trucks and vans.

A recent NAIOP online panel discussion examined how developers can work with local communities to address these worries through outreach and engagement, as well as with design and technological innovations.

“Education is key to establishing that relationship early on,” said Sven Tustin, executive vice president with Conor Commercial, who moderated the panel. “The developer has to listen to concerns. Residents look at a site plan that shows 200 dock doors, and they assume that there will be 200 trucks coming in and out 24/7.”

Originally published on September 6, 2022 by Patrick Sisson for Bisnow National.

Women in commercial real estate, particularly those in the upper echelons of management, have made gains when it comes to equity and pay parity in the workplace, but talent pipelines, mentorship and diversity in leadership ranks still leave something to be desired.

That’s according to a pair of new surveys on the careers and perceptions of women in commercial real estate as the industry goes through a generational upheaval in the aftermath of a pandemic and racial reckoning that have changed the way workplaces work.

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Originally published on September 3, 2022 by Rebecca Picciotto for the Wall Street Journal.

Affordable-housing developers nationwide are stalling work on new projects, delaying thousands of units from coming to market when the U.S. already has a broad deficit of low-income housing.

Rising interest rates and inflation have made financing for affordable housing more difficult and costly. Supply-chain issues for materials like lumber and appliances have eased a bit recently but haven’t gone away.

Bonds on November Ballot For Charlotte, Gastonia

On Nov. 8, Gastonia residents will vote on a $75 million Transportation General Obligation Bond Referendum. The City Council approved the bond referendum at its Aug. 2 meeting.  

Proposed projects include:

• Street and road repairs
• Pedestrian walkways (sidewalks)
• Street resurfacing
• Utility relocations
• Street intersection improvements
• Street light improvements

For more information, visit this link.       

Charlotte voters will also have the opportunity to vote on a $226 million bond package that will upgrade and enhance streets, build housing for low-to moderate-income individuals and families, and improve infrastructure in the city's older neighborhoods and emerging high-growth areas. 

Amid lower pressure on global supply chains, increasing inventory carrying costs, a cooling economy and a decrease in the rate of e-commerce expansion, retailers and logistics firms have slowed the rate at which they acquired additional industrial space this year. Net absorption of industrial space in the first two quarters of 2022 was 151.2 million square feet, down sharply from 2021’s record pace but still notably higher than in prior years (see Figure 2). The authors expect the still-hot industrial market to cool, and they forecast that the net absorption rate will continue to decline until it returns to the pre-pandemic trend. Total net absorption of industrial space in the second half of 2022 is forecast to be 112.4 million square feet, and full-year absorption in 2023 is forecast to be 209.4 million square feet (see Figure 1 for quarterly projections).

The Industrial Market

Supply chain congestion eased during the first half of 2022, as illustrated by the decline in the Federal Reserve Bank of New York’s Global Supply Chain Pressure Index from 4.35 in December 2021 to 2.41 in June 2022. As a result, retailers and logistics firms have shown less interest in leasing or buying industrial space before it is needed, a trend that contributed to higher absorption in 2021. Amazon’s decision to substantially scale back its expansion plans is the most prominent example of this shift in demand for industrial space. Nonetheless, smaller e-commerce firms, and even traditional retailers, continue to lease more distribution space despite slowing e-commerce growth as more consumers return to shopping at bricks-and-mortar retail. Industrial vacancy rates remain historically low as the ability to supply new space continues to face physical and political limitations in land-constrained markets. These low vacancy rates continue to cause asking rents, and ultimately transaction prices, to increase. Premium prices are being paid for properties with soon-to-expire leases and even vacancies as they allow owners to lease out more space at record-high market rates.

By Toby Burke

The economic slowdown from the COVID-19 pandemic initially raised concerns within states that general revenue collections would be lower than anticipated and, as a result, create shortfalls in maintaining a balanced budget. Although revenue collections from specific sectors of the economy, such as hospitality and tourism, were lower, overall revenue shortfalls from the pandemic did not materialize in most states. Partially bolstered by e-commerce and the collection of state sales tax from internet transactions, revenue collections increased, producing budget surpluses. These surpluses provided an opportunity for states to enact various tax relief measures.

To put it in perspective, the Fiscal Survey of the States, spring 2022 version, from the National Association of State Budget Officers (NASBO), indicates that general revenue collections have increased in 49 states for the fiscal year 2022. The estimated 3.2% growth in revenue collections for the fiscal year is projected to be followed by a more nominal growth of 1.4% for the fiscal year 2023.

Midway through the fiscal year 2022, the National Conference of State Legislatures (NCSL) also reported that revenue collections remained strong and surpassed expectations based on personal income taxes, sales taxes, and other revenue sources. These budget surpluses from more vital than anticipated revenue collections have spurred state legislatures to debate and pass legislation that reduces taxes and provides economic incentives and other tax credit measures within their budgets for the fiscal year 2023. The Georgia General Assembly, for example, passed HB 1437 this year, which replaces the state’s graduated income tax – the top level of 5.99% – with a flat tax starting at 5.49% that will gradually reduce to 4.99% by 2029.

An overview by the Tax Foundation of tax reform measures within the states included:

By Marie Ruff

Since the start of the pandemic, sleepy small towns and suburbs have taken on new luster as people have migrated en masse from the urban core, drawn by the lower cost of living and with the flexibility afforded by increased remote work options. Will this be the new normal, or will people move back to the major metropolises once we put the pandemic behind us? What does it mean for office real estate in the short and long term?

In a recent NAIOP webinar, experts from Marcus & Millichap shared their research and insights into how these trends are shaping the investment landscape for urban and suburban office spaces. They began by examining the broader economic context underlying the urban to suburban shift before discussing recent office sale trends, the impact of demographics and what’s ahead for this sector.

U.S. Office Supply and Demand Trends

Office vacancy rates have been elevated since the onset of the pandemic; however, office rate absorption has also been positive for five consecutive quarters. “Although it is soft, it is not as soft as some people perceive,” said John Chang, senior vice president, national director research services, Marcus & Millichap. There was only a brief period of net negative office space absorption in 2020 and have been making a recovery, albeit sometimes slowly, since.

TOP FIVE US METROS FOR LIFE SCIENCES IN 2022

By Ioana Ginsac

Growth in the life sciences sector has driven demand in recent years for both commercial real estate space and labor to accommodate this specialized sector. A new study by commercial real estate platform CommercialCafe set out to identify the best metros for life science companies in 2022 and assessed more than 40 metropolitan statistical areas (MSAs) in terms of regional talent pool and workforce; accessibility of local office markets; the degree of availability of existing dedicated property; as well as the state of the local pipeline aiming to expand local life sciences capacity.

Boston took the number one spot on the list, with San Francisco in second place, then San Diego third, New York fourth, and Washington, D.C., rounding out the top five.

A longtime “flagship market” for life sciences, the Boston metropolitan area remains a leader in the sector. The MSA stood out for several key indices scored in the ranking: Boston boasts the largest labor pool among the metros analyzed, as well as the largest life sciences real estate market — nearly 25 million square feet of existing dedicated property, of which just under 14 million square feet was LEED-certified space. What’s more, with an additional 23.8 million square feet of new life sciences developments in the pipeline — under construction, as well as in the planned and prospective stages — Boston seems firmly placed at number one for the foreseeable future.