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How Technology Will Change the Brokerage Business

Posted on January 16, 2019

Written by Joan Woodard

Commercial real estate is in the midst of a digital revolution, and some of the biggest upheavals will affect professionals who work closely with property owners and tenants.

Technological innovation is accelerating in the commercial real estate space, and it has the potential to disrupt a large segment of the brokerage business.

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The Positive Impacts of Big Data on the Supply Chain

Posted on December 19, 2018

As companies collect and analyze more data, supply chains and warehouses operations will most likely be improved, trending towards transparency and efficiency. JLL identified six likely benefits of big data across the supply chain:

  • Enhancing predictions and planning: What do customers want and when? Being able to predict the demand of shoppers can make supply chains and warehousing more proactive. Greater use of consumer spending data through algorithms should make supply chains more nimble and reactive.
  • Keeping a closer eye on goods: Technological advancements mean it’s now easier to track and trace products than ever before. Track and trace systems will create more certainty along the entire supply chain.
  • Getting more from distribution networks: Many businesses only review their distribution networks on an infrequent basis, often using incomplete data sets and with limited insights on developing trends. This is where big data could prove useful.
  • Delivering goods more efficiently: The growth of e-commerce has meant that more packages leave warehouses than enter them; one box of gadgets from a wholesaler could go on to 10 or more separate addresses. Being able to improve scheduling and routing of deliveries is a potential cost cutter especially when it involves multiple drops.
  • Reducing risk from the elements: Big data can help lessen supply chain risk from external factors – such as the weather.
  • Creating smart warehouses: Another way to improve efficiency and cut costs is within the walls of the warehouse itself. More connectivity – for example through new 3D digital tools – can boost the efficiency of operations inside, as well as energy performance.

Why Losing Out on Amazon's HQ2 Isn't So Bad for Cities

Posted on December 14, 2018

GOVERNING reports that Amazon’s decision to locate its second headquarters in already economically strong areas drew the ire of those who had hoped the company would choose a city that needed a boost. However, landing a large corporation isn’t the best way to improve a local economy and spur job growth. The article cites a report by the Urban Institute and the Brookings Institution that advised cities to concentrate on growing existing business and not luring outside companies. “Most job expansion and contractions come from birth and deaths of homegrown businesses or expansion or contractions of existing home-based businesses,” said Megan Randall, a coauthor of the report.

The report also cautioned that tax incentives do not play a significant role in attracting businesses. Although New York City and Virginia offered tax subsidies to Amazon, the company claimed the incentives were not the deciding factor, but rather the highly skilled and educated labor force in each of the locations. Offering generous tax incentives can be especially onerous on localities which do not have the fiscal strength of New York or Washington, D.C., and force difficult trade-offs in levels of public services. Additionally, when a city offers tax giveaways to lure a company, the government goes into the negotiation at a disadvantage because it may not have all the information about the company’s relocation criteria. In some cases, a company may choose a city it would have moved to anyway, pocketing the tax incentives even though they weren't a requirement.

Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on December 13, 2018

By Dr. Hany Guirguis and Dr. Joshua Harris

The U.S. office market posted solid net absorption levels in the second and third quarters of 2018 of 18.0 million and 11.0 million square feet, respectively. This level of new leasing is likely due to higher-than-expected economic growth and the subsequent demand brought about by jobs created in the office-using sectors.

Due to third quarter 2018 U.S. GDP growth of 3.5 percent and a current unemployment rate of 3.7 percent, 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. The forecast is strongly dependent on continued annual economic growth near 3.0 percent, which seems plausible for all of 2019 and into 2020 given current data.

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Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on November 21, 2018

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2018.

Key Takeaways

  • 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. 
  • The current macroeconomic expansion will most likely continue beyond next summer, which will officially make it the longest sustained economic growth period in U.S. history. 
  • However, the biggest limitation to the expansion of firms that use office space is likely to be the ability to hire qualified employees.

Regarding office space demand, the ultimate determinant of long-term growth will be how the business sector reacts to rising wages and interest rates.

View the forecast.

NAIOP CRE Sentiment Index: Positive Reading Reaches All-time High

Posted on November 2, 2018

The NAIOP CRE Sentiment Index for September 2018 (a composite of nine survey questions), showed positive changes in seven of the nine questions that underpin the Index. This survey's 0.66 Sentiment Index reading is the highest posted since the full survey commenced in March 2016.

Key takeaways:

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New 2018 CRE Compensation Reports Now Available

Posted on October 9, 2018

Recruiting and retaining top talent has become essential in today's highly competitive marketplace.

Is your 2019 salary and bonus package competitive? Find out with the 2018 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports.

These valuable reports enable commercial real estate businesses to stay current on salaries, bonuses and benefits for CRE professionals from executive to entry level positions. The reports include submissions from 400 companies; salary, bonus, incentives and benefits for 200 positions; and data from 100,000 distinct jobs in the office/industrial, retail and residential property sectors.

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Q3 2018 Industrial Space Demand Forecast Now Available

Posted on September 4, 2018

Written By: Dr. Hany Guirguis and Dr. Joshua Harris

The forecast for demand for industrial space has risen because of increased expectations of broad macroeconomic growth and job generation for the remainder of 2018 and 2019. According to Dr. Hany Guirguis of Manhattan College and Dr. Joshua Harris of New York University, quarterly net absorption is expected to increase to an average of 60 million square feet for the latter half of 2018 and then moderate to 56 million square feet per quarter in 2019.

Advance indications for gross domestic product (GDP) growth for the rest of 2018 show consensus forecasts approaching annualized growth of 4.0 percent for the second quarter, which could result in sustained growth of 3.0 percent or more for the rest of the year and into 2019. Higher oil prices are a leading cause of increased business investment because as oil prices rise, there is more incentive to increase energy production and commence energy exploration – activities that significantly stimulate the overall economy. Another major force at play is consumer spending, as e-commerce continues to generate demand for industrial space.

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Marcus and Millichap: Competition for Staff Invigorates Office Space Demand

Posted on July 16, 2018

The number of available U.S. jobs now exceeds the number of people out of work and seeking employment. At the end of April, job openings stood at 6.7 million while the number of unemployed reached 6.3 million. The June 2018 Marcus and Millichap Research Brief finds that an effect of a competitive labor market is that office-using employment is driving down office vacancy rates, and over the past 12 months, the professional and business sector has been expanding at a faster pace than overall employment, driving up office demand. The professional and business sector added almost 500,000 jobs and grew at 2.5 percent compared to the national rate of 1.6 percent. The increased hiring, according to the report, drove down the national office vacancy to 13.8 percent in the first quarter of 2018.

The Impact of Ridesharing on Real Estate

Posted on July 13, 2018

recent report by MetLife states that the expansion of ridesharing, autonomous vehicles and electric vehicles will result in “highly accessible, highly efficient and comparatively inexpensive transportation” over the next decade. Researchers believe that alternative transportation, including ridesharing, will partially substitute public transportation in some areas of the U.S. and complement it in other areas, while also bringing transit access to areas not served by public transportation. The report concludes that the greater acceptance of ridesharing will lead to an increase in value for development sites with good access to uncongested roadways but limited access to public transportation.

Build Smarter: Seven Ideas for Containing Construction Costs

Posted on June 29, 2018

By Clay Edwards

Though the real estate industry has seen a development rebound over the past decade, rising construction costs are weighing down the buoyant market. The persistent skilled labor shortage makes staffing and maintaining sites expensive. Materials are pricier, and now tariffs on steel, aluminum and lumber imports may only make the problem worse. At the same time, interest rate growth is converging with all these issues, making project financing more difficult to obtain and more costly.

recent survey of top construction lenders conducted by Construction Lender Risk Management Roundtable found that almost two-thirds said they saw projects running over budget either more often or much more often, and 87 percent said they saw projects running behind schedule, driving up the risk of project defaults and unfinished sites.

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Recognition for Foundation-sponsored Research

Posted on June 21, 2018

Emil Malizia, Ph.D., former NAIOP Distinguished Fellow, was featured in Planning magazine's July 2017 "Research You Can Use" column for his NAIOP-sponsored study, Preferred Office Locations: Comparing Location Preferences and Performance of Office Space in CBDs, Suburban Vibrant Centers and Suburban Areas.

Dustin Read, Ph.D., former NAIOP Distinguished Fellow, received a prize for research based on Case Studies in Innovation District Planning and Development, a NAIOP report he authored in 2016. His paper, entitled "Innovation Districts at the Crossroads of the Entrepreneurial City and the Sustainable City," won best paper in the mixed-use development category at the 2017 American Real Estate Society meeting.

Amenitize to Survive: Why traditional amenities are no longer enough

Posted on June 19, 2018

Years ago, the key to attracting and retaining a talented workforce was to relax the rules a bit: Casual Fridays, flexible work hours and teleworking were the employee perks du jour.

Now, the competition for top talent is driven by the demand for amenities of the less tangible type. The highly specialized labor force seeks a “more interactive, collaborative and socially vibrant office environment,” with “amenities that enliven the workplace and create the elusive concept of community,” according to NAIOP Research Foundation report, Activating Office Building Common Spaces for Competitive Advantage.

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Southern US Cities Gaining Population

Posted on June 15, 2018

The U.S. Census’ newest population estimates reveal that eight out of the 15 U.S. cities with the largest population gains are in the south, with three of the top five located in Texas. San Antonio topped the list with an increase of just over 24,000 people between 2016 and 2017. Some of the other cities with the largest population gains were Phoenix, Arizona (24,000); Dallas, Texas (18,900); Fort Worth, Texas (18,700); Los Angeles, California (18,600); Seattle, Washington (17,500); and Charlotte, North Carolina (15,600). Fort Worth, Texas, surpassed Indianapolis, Indiana, to become the fifteenth-largest city in the U.S., with a population of 874,168. The list of the top 14 largest U.S. cities has not changed since 2016.

Top Office Obstacles: Parking and Technology

Posted on June 11, 2018

According to a new Cushman and Wakefield report, Space Matters: Key Office Trends and Metrics, two important trends in office space include technology amenities and parking. Common amenities – such as fitness centers and cost-effective food options – remain very important but there is ample opportunity for growth in how technology-related amenities are leveraged by occupiers and landlords. Despite advances in technology, researchers found many office building owners continue to struggle with some of the most basic offerings such as seamless, high-speed internet and cellular service.

In many urban submarkets, parking supply is a challenge and high prices have been forcing innovative solutions. According to the report, the predominant reason people utilize ride-sharing services such as Uber and Lyft is to avoid parking. In some cases, this has led owners to provide valet or shuttle services to connect offices with off-site parking, including garages in different parts of a city.

New Office Space Demand Forecast: Signs of a Structural Shift

Posted on May 31, 2018

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q2 2018.

Key Takeaways

  • The U.S. office markets absorbed just 1.3 million square feet on a net basis in the first quarter of 2018, according to CBRE. 
  • This performance represents a significant conundrum, as every economic indicator used to forecast absorption performed at or above the forecast level. 
  • While the first quarter reading may be a one-time anomaly, it cannot be discounted that a structural shift in the office space market has or is occurring
  • The forecast for net absorption of office space has been reduced to 8.4 million square feet per quarter for the remaining three quarters of 2018.

On a positive note, many developers, lenders, and even tenants are not over-expanding or being overactive, meaning that there is a low likelihood that there will be excess space that they will need to vacate in a downturn.

View the Q2 2018 Forecast

Retail Outlook for 2018: Changes and Opportunities

Posted on May 24, 2018

According to Cushman and Wakefield’s first quarter report on shopping centers, the retail sector will continue to struggle despite a strong economy. However, it’s not all bad news – while stores found in malls and power centers (e.g., electronics, department, sporting goods) will continue to decline, other sectors will expand, such as dollar stores, discount grocery, off-price apparel, beauty/cosmetics, fitness/health clubs, fast food, coffee and fast fashion, most of which operate in neighborhood and community centers. According to the report, these trends could benefit the owners of Class A malls. "Anchor closures at trophy or Class A malls present opportunities for landlords to attract new, more relevant tenants such as food halls, experiential concepts or other trendy new retailers at current rents," the report states. "Landlords will also see non-traditional mall tenants such as discounters, off-price or grocery chains move into some of these vacancies."

Female Coworking Spaces: On the Rise and Under Scrutiny

Posted on May 2, 2018

By Jennifer Lefurgy, PhD

According to a recent Global Coworking Survey, 1.7 million people will be using 19,000 coworking spaces around the world by the end of 2018, and 40 percent of those users will be women. Since the industry launched in the mid-2000s, coworking companies have marketed to predominantly young, single men and provided associated amenities such as pool tables, craft beer, and other lures that typically encourage male bonding. This strategy has begun to change as the number of women using coworking services is predicted to rise and as women continue to voice their need for safer workplaces. Several female-focused coworking companies such as ShecosystemPaper DollsBloomRise Collaborative Workspace and Hera Hub have opened multiple locations in North America and Europe. Women-centric workspaces offer what traditional coworking spaces do not: calm, spa-like interiors; child care; lending libraries featuring female authors and mentorship programs.

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Net Lease Sector Stable in 2018

Posted on April 20, 2018

The Net Lease Research Report by National Real Estate Investor (NREI) finds the single-tenant net lease sector will remain "in solid shape for the foreseeable future, even in what many are viewing as the late stages of the current real estate cycle." The results were compiled from 490 responses from a February survey of NREI readers; about half of the respondents held the titles of owner, partner, president, chairman, CEO or CFO. Sixty-three percent of survey participants expect cap rates for net lease properties to increase over the next 12 months. Debt and capital equity are also expected to remain as available as they have in the previous two years. The industrial and medical office sectors are predicted to drive the strongest demand over the next year. Respondents commented that there are "diamonds in the rough in secondary/tertiary markets," and the influx of German stores Lidl and Aldi will create investment opportunities. Dollar stores, largely protected from the rise of e-commerce, have "become a popular bet for some net lease investors."

US CRE Outlook is Positive, Bolstered by Confidence in Employment, Debt/Equity Availability

Posted on April 12, 2018

About The NAIOP CRE Sentiment Index

The NAIOP Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months. The forecast is not based on an analysis of historical data, but rather it represents a look into the future by real estate developers, investors and operators. These NAIOP members are asked to respond to questions based on their ongoing work, including projects in their pipelines. For more information, see Understanding the Index.

Download the report.