Originally published by Matthew Goelzer and Maribel Barba for the Spring 2023 Issue of NAIOP Development Magazine.

A one-of-a-kind Costco arises in a Mexico City neighborhood.

Imagine playing soccer or shooting hoops on the outskirts of Mexico City while atop a 524,549-square-foot Costco Wholesale project. Built on a landfill, this unique retail warehouse, parking structure and loading bay is almost completely hidden from public view. 

In addition to the soccer field and basketball courts, the Costco also houses a children’s roller park and a green roof, which are designed to meld into the neighboring landscapes and serve the community. A pedestrian bridge and walking/running path connect the sports facilities to the adjacent Parque La Mexicana, integrating the new installation with the urban park’s sprawling recreational offerings. 

It’s not news that large parcels of developable land can be difficult to come by in dense urban areas. Finding a location in burgeoning Santa Fe, once a sand quarry, then a construction landfill, and now an economic hub dotted with high-rises outside Mexico City, was no small challenge. 

Read More

Members from NAIOP’s three chapters are in Raleigh today to advance the priorities of the commercial real estate development industry in meetings with state lawmakers. The 2023 Legislative Priorities focus on economic development initiatives, tax measures, and regulatory reforms that meet the current and future growth within the state.

A top priority for NAIOP of North Carolina this year is local permit reform legislation that reduces inefficiencies and brings more accountability, consistency, and transparency to the process. The passage of HB 332/SB 275I will achieve this by establishing a 21-day period for a local entity to review an application. If the local permitting entity is unable to meet this timeframe, the applicant may seek approval from a third-party (engineer) or the Department of Insurance. Other elements of the bill include:

• During the 21 days, the local entity shall resolve issues associated with the application and may seek additional information from the applicant.
• If additional information is needed or the application must be resubmitted, the permitting entity has 15 days from receipt of the additional information to issue a permit.
• Upon acceptance of a certified approval of an application, the local government shall have 72 hours to issue the permit and refund all applicable fees.
• Upon permit issuance based on third-party certification, the local government and inspection department are released from any liabilities, responsibilities, or claims arising under this legislation.

NAIOP members are distributing a Permit Reform Flyer during meetings to ensure lawmakers are informed and educated on the significance of this legislation for the industry. The flyer reflects the importance of passing HB 332/SB275 now!

NAIOP’s Day at the State Capitol underscores the importance of NAIOP and its members remaining engaged at every level of government to ensure the interests of commercial real estate are considered during the policymaking process.

While interviewing Tracy Montross, we discovered some amazing facts about her, and the impact this pivotal airport and airline has on the health of our entire region.  For instance, did you know that at one point during the pandemic, our own Charlotte Douglas International Airport (CLT) was the busiest terminal in the world?  It’s a testament to the airline that has helped put us on the world map in terms of attracting, maintaining, and growing business opportunities around the greater Piedmont region.

Charlotte, (or CLT which represents 5% of the entire GDP for the state of North Carolina) is fortunate to serve as America’s second-largest hub, connecting us to the world with an average of 560 daily flights, more than 170 destinations, and 23 countries, serving more than 42 million travelers in 2022.  Its regional impact on our economy, huge employment figures, and the way it supports our ability to attract world businesses; this is truly a subject REBIC wants you to know about!

Listen to this very entertaining podcast, here.

Mortgage borrowers with good credit may face higher costs under a new plan from federal mortgage associations Fannie Mae and Freddie Mac.  The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023.  Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.

• Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees.
• LLPAs are upfront fees based on factors such as a borrower's credit score and the size of their down payment.  The fees are typically converted into percentage points that alter the buyer's mortgage rate.
• Under the revised LLPA pricing structure, a home buyer with a 740 FICO credit score and a 15% to 20% down payment will face a 1% surcharge – an increase of 0.750% compared to the old fee of just 0.250%.
• Meanwhile, buyers with credit scores of 679 or lower will have their fees slashed, resulting in more favorable mortgage rates.  For example, a buyer with a 620 FICO credit score with a down payment of 5% or less gets a 1.75% fee discount – a decrease from the old fee rate of 3.50% for that bracket.

We strongly support housing affordability and are on record promoting six specific strategies aimed at achieving just that, but the approach summarized above is misguided and not likely to achieve its intended purpose.

Originally published on April 28, 2023, by Marie Ruff for NAIOP.

There is no one path to commercial real estate development, but for Gregory Boler Jr., a recipient of the 2022 Developing Leaders Award, his career journey started with a mechanical engineering degree at Georgia State University. JLL’s Project and Development Services (PDS) Group interviewed Boler as part of an effort to recruit diverse entry-level talent in technical majors from historically black colleges and universities (HBCUs). He was one of four students selected and began his career working for JLL’s PDS Group in Atlanta.

“This was the only year that JLL’s PDS vertical recruited nationals at HBCUs, for which I’m grateful because I cannot imagine doing anything else,” Boler said.

Boler has a dozen years of experience in acquisitions, development, construction, leasing, asset management, and disposition. As managing director, of east region investments, Bridge Logistics Properties, his roles include sourcing and executing existing industrial acquisitions and new industrial developments. He currently manages several team members across the East Coast; his region stretches from Georgia to Pennsylvania and into New Jersey.

Read More

Originally published on April 18, 2023, by Eric Schmutz for NAIOP.

Congress returned this week from its Easter and Passover recess facing what promises to be a heated debate over raising the nation’s borrowing limit. On Monday, House Speaker Kevin McCarthy visited Wall Street to debut the latest House Republican proposal to raise the debt ceiling. In his speech, McCarthy stated that in the coming weeks, the House would approve a one-year increase in the debt limit that will include a reduction in discretionary spending to 2022 levels while limiting future increases to 1% annually over the next 10 years.  

This is the Republicans’ first proposal to raise the debt limit since U.S. Treasury Secretary Janet Yellen informed Congress on Jan. 13 that the federal government would exceed its borrowing authority of $31.38 trillion a week later, on Jan. 19. If  McCarthy is able to get his proposal approved by the House, it will show an unprecedented level of Republican unity and will significantly strengthen his hand in negotiations with President Joe Biden, who demanded a “clean” debt ceiling increase during their Feb. 1 meeting – the only time the two have met in person on the topic.

Read More

We definitely see growing momentum around the country related to adaptive reuse.  In some cases, this involves office-to-residential conversions and in others office to other institutional uses.  You may recall we started beating the drum on this back in November as one of our six strategies related to housing affordability (click here) with the mindset that increased production of housing units would be a positive outcome.

Since that time, we have had an opportunity to talk to a lot of folks who agree that we should see if we can make it work.

One architectural firm in particular, Gensler, has put much effort into the concept.  Click the links below to learn more about how these ideas could become a reality.

• Gensler Blog - What We Learned
• Gensler Blog - Converting Class C Office Space
• Gensler Webinar
• Calculator Presentation

Originally published on April 20, 2023, by Gary Tasman for NAIOP.

If you’ve ever attended a ceremonial groundbreaking for a school, restaurant, corporate headquarters, or other new building, you understand the symbolism of that first turn of the dirt. The groundbreaking ceremony signifies the physical start of a construction project. In most cases, however, months or even years have already been spent preparing the land for future growth, as planners and developers work behind the scenes to make the property “shovel-ready.”

Attempting to market a property that is not shovel-ready can be a significant barrier to making a commercial property sale. In fact, it’s hindered some significant transactions where our company is based in Southwest Florida. But what does it mean to have a shovel-ready property, and why is it so important?

What Does Shovel Ready Mean?

The term “shovel ready” became popular during the Great Recession as part of the American Recovery and Reinvestment Act of 2009. The legislation placed funding priority on projects that could begin construction rapidly, in hopes of jumpstarting the economy by providing investment and employment opportunities quickly. The phrase became an important buzzword, and an even more important strategy, in commercial real estate.

Read More

During last night's meeting, the Charlotte City Council held a hearing on four text amendments related to the soon-to-be-implemented Unified Development Ordinance (UDO).  Since these were introduced several weeks ago, REBIC representatives met with Planning Staff and suggested revisions to the proposed amendments, some of which were accepted, and some were not.  This is the first round of changes that will likely be made over the course of the next couple of years.   Here are the details:

• Text Amendment to the Charlotte Tree Ordinance - (1) Adds new requirements for collected civil penalties to only be used to further the purpose, intent, enforcement, spirit, and requirements of the Charlotte Tree Ordinance with regard to the use of collected funds; (2) Corrects numerical and roman numeral sequencing in Articles; and (3) Deletes two unintentional words in one sentence.  
• Text Amendment 2023-056 - Amends the UDO for the use Landfill, Land Clearing, and Insert Debris (LCID) by (1) deleting it as a use permitted with prescribed conditions in all zoning districts except ML-2; (2) modifying the use in the ML-2 zoning district as a use requiring a conditional zoning that complies with the prescribed conditions; (3) increasing the distance between an operational portion of an LCID landfill to 50 feet from any property line; (4) adding a requirement that the actual fill area shall be located at least 300 feet from any Neighborhood 1 or Neighborhood 2 Place Type or an existing residential structure in any other place type; (5) deleting collector streets as a permitted primary vehicular access; (6) adding limited hours and days of operation for the use; (7) adding a requirement for a geomembrane liner and leachate collection system subject to state standards that is equal to or exceeds the state criteria for municipal solid waste landfill units; (8) adding a requirement that the use shall comply with the state groundwater well and surface water requirements for a municipal solid waste landfill; and (9) deleting the requirement for a zoning permit for the use. 
• Text Amendment 2023-057 - Amends the UDO to allow Multi-Family Attached and Multi-Family Stacked development in the CG and CR zoning districts under certain conditions and to modify the prescribed conditions for the principal use of Drive-Through Establishment and the accessory use of Accessory Drive-Through (formerly Drive-Through Facility) to limit their use in Centers Place Types.
• Text Amendment 2023-058 - This is a broad "clean up" amendment that corrects errors in the adopted ordinance and will improve functionality.  This is the first of many such amendments that will be proposed over time.  Click this link for a Summary Memo that describes the proposed language changes.  

A final vote on the amendments will likely be held prior to Memorial Day as the originally adopted ordinance becomes effective on June 1st.

Community Area Planning (CAP) started its spring workshops on March 28th with the West Middle geography. Workshops will be held in 14 geographies throughout the city. Each area will have a virtual, evening, and weekend workshop option. Spring/Fall workshops are part of the two-year CAP project, and the next step in implementing the Charlotte Future 2040 Comprehensive Plan. Community Area Planning builds upon the vision and goals in the Comprehensive Plan. It provides more detailed guidance for development, infrastructure, transportation, and other quality-of-life factors for each part of the city.

Not sure which workshop to attend?

Click here to discover your
Community Area Planning Geography!

Ready to register?

Click here to sign up for a workshop in your area!

Last Thursday the Charlotte City Council held a Budget Workshop as it works toward a May/June approval of the Fiscal Year 2024 Budget set to begin on July 1st.  To view the full meeting, click this link.  Additional inks to presentations provided can be found following here: 

• Revaluation Update Presentation 
• Revaluation Impacts
• CATS FY 2024 Budget Outlook
• CATS One-Pager
• Charlotte Water FY 2024 Budget Presentation
• Charlotte Water One-Pager
• March 9th Budget Workshop Follow Up

In a move that is definitely backward motion, that will create uncertainty, and potentially threaten the economic vitality of an important part of our region, the Board of Commissioners of the Town of Mooresville adopted a resolution establishing a working group to study the legal requirements of imposing a growth moratorium. 

To view the meeting (total time under one hour) please use this link.  We will be following this development closely.  Click here to view the current Mooresville Comprehensive Plan.  As a reminder, municipal elections occur later this year with filing commencing on July 7th and ending on July 21st.  In closing, this kind of activity is the reason we ALL NEED to be educated and get involved. If you're reading this, your next move should be making sure your own cities and towns aren't moving in this direction.  Help them understand. Use your knowledge!  

Originally published on April 10, 2023 by Miles Haladay for NAIOP E-Newsletter.

America faces a multipronged real estate crisis. We have a stubborn residential housing shortage, high office vacancy rates, and flight from many downtown hubs that is killing off businesses servicing those areas. In West Coast cities like San Francisco, it’s been dubbed the “donut effect,” with workers moving farther away from the urban core.

We need to build 3.8 million more housing units in the United States to keep up with household formation rates – and we’re very behind. Construction rates need to double from now to 2030 to bring us up to speed. Climate change only raises the stakes: to stave off the worst-case climate scenario and double construction output in the next seven years, we need to slash per-project emissions by at least 70%.

Converting office towers into housing could solve multiple problems at once: increase available housing; revitalize downtowns and their property tax base; all while attracting populations to city centers where green living is easier.

Read More

Erin Shaw is slated to become the newest member of the Charlotte Mecklenburg Planning Commission as she received seven recommendations during last night's Council meeting earning her an automatic appointment.  Erin is a Managing Director with Beacon Partners, a REBIC Member, serves on the Charlotte Region Commercial Board of REALTORS®, a participant in the Urban Land Institute National Development Council, and is a member of NAIOP.  She will add a wealth of experience to the commission.  

 

 

Read Bio

Originally published on April 5, 2023, by Leona Savoie for NAIOP Newsletter.

The Canadian government enacted legislation on Jan. 1, 2023, that disrupted commercial and residential real estate development across the country. The Prohibition on the Purchase of Residential Property by Non-Canadian Act (the “Act”)  was originally intended to be a demand-side solution to make housing more affordable for Canadians by prohibiting residential purchases by non-Canadians over the next two years. However, the regulations under the Act, released only a week before enactment, unintentionally halted commercial investment in current and future residential and mixed-use projects in major metro areas.

The NAIOP Research Foundation issued a report last August highlighting the importance and contributions of commercial real estate to the Canadian economy. The report, specifically, found that the industry generated the following economic benefits in 2021:

• Generated $148.4 billion in net contribution to GDP.
• Created and supported 1.0 million jobs, of which 372,710 are direct jobs.
• Generated $67.5 billion in labor income for workers.

Read More

Originally published on April 3, 2023, by Kathryn Hamilton, CAE for NAIOP E-Newsletter.

“There’s a really exciting trend emerging in hiring and compensation that’s going to accelerate throughout 2023,” opened Chris Lee, CEO of CEL & Associates, during a recent NAIOP webinar. “It’s the blending together of the quantitative – the numbers, compensation and bonuses – and the qualitative – workplace environment and benefits.”

Lee detailed compensation and benefits trends identified in his firm’s annual Compensation and Benefits Report, jointly published in partnership with NAIOP and specializing in commercial real estate firms and positions. In 2022, bonus realization for performance was around 90% of target – quite high, but a key tactic for attracting and retaining talent. Base salary increases in 2023 range from 4-6% overall, and higher for mission-critical positions.

Read More

The City of Charlotte UDO team is hosting two online (Zoom) informational sessions on Tuesday, April 11, 2023, to provide information about four proposed text amendments that have been filed.  If approved, these text amendments will be in place when the UDO and amended Tree Ordinance go into effect on June 1, 2023. They are: 

1. RZ#2023-056 concerning Land Clearing and Inert Debris (LCID) Landfills;
2. RZ#2023-057 concerning uses in Centers Place Types;
3. RZ#2023-058 concerning a series of clean-ups to the existing adopted UDO, and
4. Amendment making modifications to the Tree Ordinance.

The first session is scheduled from 12:00 noon to 1:30 p.m., and there will also be an evening session from 6:00 p.m. to 7:30 p.m.  The same presentation will be made at both sessions, so you may choose the time that is most convenient for you. 

Advance registration is required.  Please use the following link to register for one of these sessions. 

CharlotteUDO.org

Originally published by Kim Snyder on March 27, 2023 for NAIOP E-Newsletter.

In the Spring issue of Development magazine, I shared some of my thoughts on our industry, my goals as chair, and what I see as NAIOP’s greatest member value. I had so much to share that I quickly ran out of room! So, I’m sharing an extended cut of our conversation with our Market Share blog readers. If you already haven’t, I’d invite you to read my recent column in the Spring issue of the magazine.

What are your goals as NAIOP Chair?

Our association is growing – surpassing new records at the end of 2022 – yet the membership structure is complex and can be challenging to explain to a new member. We need to simplify and streamline, making the structure easier to understand and removing any potential barriers for members. I’m pleased to share that a task force has been appointed to examine the structure.

Originally published on March 22, 2023, by Yonah Sturmwind and Kathy Kozak for NAIOP E-Newsletter.

“Where there’s a will, there’s a way.” This adage has never been more relevant for developers looking to finance new building projects. With Federal Reserve Chair Jerome Powell indicating that the Fed will continue to raise interest rates, traditional capital providers with strained balance sheets are pulling back on lending. And given the current economic outlook, many senior warehouse line lenders may also look to pull back on financing, opening the door for a more direct asset-by-asset approach. As a result, borrowers need to seek out alternative lenders that creatively finance their projects – enter nontraditional lenders and loan-on-loan financing partners.

How loan-on-loan financing works

Loan-on-loan (also known as “note-on-note”) financing is a common form of capital stack formation for bridge and construction lenders and offers a perfect example of a nontraditional lending approach that can provide financing for borrowers in a challenging environment. In a loan-on-loan arrangement, a senior lender (such as a bank, life insurance company or specialty lender) makes a loan to a building developer. That lender then secures senior financing for that loan from another capital provider at a lower rate, thereby increasing their margin and allowing them to offer more competitive terms to the developer. The loan-on-loan is collateralized by the loan to the developer and occupies the last loss position in the capital stack.

Read More

Originally published on March 20, 2023, by Larry Lichtenauer for NAIOP E-Newsletter.

Impending recession expected to be grinding, enduring and especially difficult for Class B and C office space

With all signs pointing to an economic recession – presumably arriving midyear or Q3 – how can the commercial real estate community best plan for this event, what lessons can be learned from similar downturns, how long will this period last and which asset classes will be particularly hard hit? Recessions cause hardships and are never a good thing, but what silver linings and opportunities will be available to savvy investors and progressive companies? Offering their insights and perspectives on this topic are Anirban Basu, chairman and CEO of Sage Policy Group and Jennifer LeFurgy, Ph.D., vice president of knowledge and research for NAIOP.    

An already-challenging real estate environment is poised to get worse

Jennifer LeFurgy (JL): The NAIOP CRE Sentiment Index is predicting a gradual slowdown this year in new development, as well as sales and leasing activity across the board, but we do not foresee a catastrophic event. The commercial office sector will be particularly impacted with projects paused, foreclosures and slower dealmaking, which rising construction costs and labor issues will exacerbate. Guidance is calling for a difficult first quarter, followed by a slow, but gradual pickup in late Q2 or early Q3. Research indicates that Class B and Class C buildings, particularly those located in urban areas, will face considerable challenges due to the number of employees still working remotely and the flight-to-quality trend prevalent among many tenants. An additional complication is a slowdown in the development approval process and difficulty in obtaining entitlements. As interest rates continue to rise, the office sector becomes increasingly risky, and we can expect to see more adaptive reuse projects.

Read More