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CRE Contributions to Your State's GDP

Posted on March 26, 2018

By Dr. Stephen S. Fuller

Development and construction of new commercial real estate in the United States – office, industrial, warehouse and retail – generates significant economic growth at the state and national levels. This annual study, “The Economic Impacts of Commercial Real Estate,” published by the NAIOP Research Foundation, measures the contribution to GDP, salaries and wages generated and jobs supported from the development and operations of commercial real estate.

Commercial real estate development and operation of existing buildings generated the following economic benefits:

  • Supported 7.6 million American jobs in 2017 (a measure of both new and existing jobs).
  • Contributed $935.1 billion to U.S. GDP.
  • Generated $286.4 billion in salaries and wages.

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Office Survey Results: Lack of Privacy Hinders Productivity

Posted on March 21, 2018

By Ioana Neamt

With all the talk of the modern workforce expecting autonomy and companies offering flextime and work-from-home arrangements, most U.S. companies still try to get employees to show up at the office. So naturally, there is ongoing interest in the discussion about the most efficient and pleasant work environment and what that might look like. Over the decades, we’ve seen several attempts by designers to rethink the office space, from Herman Miller cubicles, to the rather controversial open-plan layout and the currently highly-sought-after co-working trend. Companies have several motivations for trying out new layouts: cost-effectiveness, the need to expand quickly following a growth in the number of employees, the desire to have an office design that reflects the company culture, and so on. However, there is still one question left unanswered: what do employees have to say about their workspaces?

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Can Your Company Compete for Top Talent?

Posted on March 20, 2018

Recruiting and retaining top performers has become essential in today's highly competitive marketplace. It's not too late to find out if your salary and bonus package is competitive with the 2017 NAIOP/CEL Commercial Real Estate Compensation and Benefits Report.  

Click here to read more.

CRE's Critical Contributions to US and State Economies in 2017

Posted on March 14, 2018

By: Dr. Stephen S. Fuller

Development and construction of new commercial real estate in the United States – office, industrial, warehouse and retail – generates significant economic growth at the state and national levels. This annual study, “The Economic Impacts of Commercial Real Estate,” published by the NAIOP Research Foundation, measures the contribution to GDP, salaries and wages generated and jobs supported from the development and operations of commercial real estate.

Commercial real estate development and operation of existing buildings generated the following economic benefits:

  • Supported 7.6 million American jobs in 2017 (a measure of both new and existing jobs).
  • Contributed $935.1 billion to U.S. GDP.
  • Generated $286.4 billion in salaries and wages.
Click here to read more.

New Report: Industrial Space Demand Forecast Q1 2018

Posted on March 9, 2018

By: Dr. Joshua Harris

Industrial Demand to Remain Strong as Market Becomes Undersupplied

Demand for U.S. industrial space is expected to remain robust and steady throughout 2018, with quarterly net absorption forecast to average 55.6 million square feet. This is higher than the 44.1 million square feet of actual net absorption, on average per quarter, recorded in 2017, but lower than the 60 million square feet of quarterly net absorption forecast six months ago. According to Dr. Hany Guirguis, Manhattan College, and Dr. Joshua Harris, New York University, the predicted increase over 2017 figures is due to the faster and broader macroeconomic growth and increased consumer spending expected in 2018.

The model, run on a quarterly basis, forecasts slightly lower industrial space demand in 2019, when inflation and interest rates are expected to rise, moderating growth. U.S. gross domestic product grew by 2.6 percent in the fourth quarter of 2017, according to the advance estimate released by the U.S. Bureau of Economic Analysis, and by 2.3 percent for all of 2017. (For comparison, U.S. GDP grew by just 1.5 percent in 2016.) Sustained growth, especially with low unemployment at 4.1 percent as of January 2018, will translate into increasing demand for industrial properties as industrial users see more justification for investment and expansion of facilities.

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Examining New Types of Tenant Amenities

Posted on February 21, 2018

By: Richard B. Peiser, Ph.D. and Raymond G. Torto, Ph.D.

Office building owners have found that to remain competitive in today’s marketplace, they must enliven their buildings by offering more amenities and adding vibrancy to the common areas. Some have introduced a range of new amenities, including outdoor workspaces and food trucks, and they have also programmed areas with happy hours, featured speakers and other activities. The common element in these amenities is that they all “activate” the common space by creating opportunities for socialization among tenants and the opportunity to work in areas beyond the tenant’s suite.

The study examines the following:

  • New and different types of amenities that owners are including in buildings, their locations within the building, what they cost and how they are funded.
  • Programming or social gatherings in building common areas, the types of activities offered, their frequency, what they cost and how they are funded.
  • Whether coworking space is becoming an amenity that owners must offer in their buildings so that tenants can have access to space for occasional overflow situations.
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US Office Market Slowed in 2017

Posted on January 17, 2018

Analysis by Reis, Inc. shows the U.S. office market in 2017 experienced a slowdown in tenant expansions while supply growth stayed at about the same level as in 2016. As reported in the Wall Street Journal, the survey of 79 metropolitan areas revealed that net absorption at the end of 2017 was at its lowest since 2012. In 2017, developers added 37.6 million square feet, only 1 million square feet more than in 2016, which may mitigate slower absorption rates. Vacancy increased during the fourth quarter of 2017 in 33 of the 79 markets, with New York having the lowest (8.7 percent) and Dayton, Ohio, the highest (27 percent). According to the report, growth in absorption has been falling in part because tenants have become more efficient in how they use their space, eliminating private offices and encouraging employees to work closer together. The report stated, “office-based industries are healthy, but tenants have persisted in curbing overall leasing patterns.”

View the current NAIOP Office Space Demand Forecast.

New Construction Starts in 2018 Increase to $765 Billion

Posted on November 29, 2017

According to Dodge Data & Analytics’ 2018 Construction Outlook, construction starts will climb 3 percent to $765 billion in 2018. The growth of the construction industry will continue into 2018, but some product types, such as multifamily housing and hotels, will see less activity. Single-family housing, office building, warehouse, transportation terminal, school and health care facility construction will continue to grow during 2018.

“Overall, the year 2018 is likely to show some construction project types register gains while other project types settle back, with the end result being a 3% increase for total construction starts. By major sector, gains are predicted for residential building, up 4%; and nonresidential building, up 2%; while nonbuilding construction stabilizes after two years of decline,” stated Robert Murray, chief economist for Dodge Data & Analytics. He predicts single-family housing construction starts will receive a modest boost from post-hurricane rebuilding efforts in Texas and Florida.

Confidence in the Availability of Debt and Equity Captial Keep NAIOP Sentiment Index Positive

Posted on November 28, 2017

Release Date: Fall 2017

Download the Fall 2017 NAIOP Sentiment Index Report. 

About the NAIOP 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 the outlook of commercial real estate developers, owners, and investors. 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.

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Malls Invest More Than $8 Billion to Attract Shoppers

Posted on November 16, 2017

To create destinations that captivate shoppers beyond mere retail purchases, owners have dramatically transformed malls by investing more than $8 billion in renovations over the last three years. JLL’s new report, A New Mall Rises, explores 90 super regional and regional malls that are currently undergoing or have gone through a significant renovation during that time period.

“Malls must respond to changing shopper preferences with laser focus and evolve their purpose through redevelopments to be relevant,” said John Lambert, director of retail development for JLL. “Many of the 90 properties we looked at are elevating their role beyond purely shopping and becoming destinations for dining out and entertainment, community activities and even lodging and residential.”

 The capital improvement upgrades fell into five main categories:

  • Forty-one percent of malls added food and beverage options, and of those, 55 percent also added entertainment offerings.
  • Forty-three percent of malls are adding non-retail uses including multifamily, office, hotels, call centers, schools, distribution centers and/or medical facilities.
  • Twenty percent of malls are dedicating space to the community including open green spaces and kid-friendly play areas.
  • Ninety-four percent of malls are getting a makeover through common area improvements, rebranding and/or making tenant upgrades.
  • Twenty-two percent of malls are de-malling the space or demolishing it for the highest and best use in the community.

Deloitte: Can Real Estate Firms Keep Up?

Posted on November 15, 2017

The U.S. commercial real estate industry ecosystem is changing at a rapid rate due to new forms of technology (e.g., artificial intelligence, smart cities, mobility improvements, sensors) and demographic changes in the workforce, according to Deloitte’s Commercial Real Estate Outlook 2018. The report urges the real estate industry to embrace these changes even though they might represent uncertainty.

The key, according to the report, is to close the gap between technological changes and business productivity over the next 12-18 months by prioritizing the following themes:

  • Accelerate business: Unlock the value for REITs by examining their corporate governance and communication strategies, optimizing property portfolios and reassessing public status.
  • Avail alternative capital options: Traditional commercial real estate companies can engage with fintech startups for sharable solutions, diversified funding sources and investment purposes.
  • Augment productivity: Companies should embrace robotics and cognitive automation to improve productivity in data collection, management and analysis.
  • Advance talent and culture: The commercial real estate industry is facing a talent shortage and must be agile, innovative and collaborative to attract new employees.

CRE.Converge 2017 Session Recordings Now Available

Posted on November 13, 2017

Miss CRE's premier event? We've got you covered with the conference session recordings, recaps and news coverage you need on the CRE.Converge resources page.

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2017 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports

Posted on October 24, 2017

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

Is your 2018 salary and bonus package competitive? Find out with the 2017 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 120,000 distinct jobs in the office/industrial, retail and residential property sectors.

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NAIOP CRE Sentiment Index: Cautious Optimism for U.S. Commercial Real Estate Market Over Next 12 Months

Posted on October 20, 2017
NAIOP has released the latest CRE Sentiment Index based on a survey of member developers, owners, and investors on whether their 12-month outlook for commercial real estate development is positive, neutral or negative.
The Fall 2017 Index is 0.49, registering the second lowest reading in the history of the three-year-old survey, decreasing from 0.56 as measured in the March 2017 survey. This survey reflects an expectation that the CRE market will be moving ahead at a more cautious pace than what was expected six months ago. 
 
Key takeaways:
  • The Fall 2017 Index returned to the level noted in September 2016, when commercial real estate fundamentals were generally positive but uncertainty regarding the U.S. presidential election clouded the general economic outlook.
  • The two largest positive changes in the survey that helped keep the Index in positive territory were much greater confidence in the availability of debt and equity capital.
  • However, respondents were much more concerned about the costs of construction materials and labor – with these two survey components hitting all-time lows. 
View graphs and observations for each of the 10 questions about jobs, the space markets, construction costs, the capital markets and more.
View the Report
To share your feedback or inquire about participating in the next Sentiment Index survey, contact [email protected].

U.S. Cities' Revenue Growth to Contract in 2017

Posted on October 11, 2017

According to a report by the National League of Cities, U.S. cities’ revenue growth will shrink for the second consecutive year in 2017. The findings in “City Fiscal Conditions 2017,” based on a survey of finance officers from 261 cities, “signal a trend that was last seen in 2006 before the Great Recession.”

Key discoveries include:

  • “General Fund revenues are slowing. General Fund revenues grew by 2.61% in 2016, and revenues are projected to stagnate with just 0.9% growth in 2017.”
  • “Property tax revenue growth is budgeted much lower than in 2016. Finance officers have budgeted for 1.6% growth in property tax revenues in 2017, compared to 4.3% in 2016.”
  • “Finance officers project a decline in sales and income tax revenues for 2017. Both sales and income tax revenues grew in 2016 (by 3.7% and 2.4%, respectively), but finance officers project a decline in 2017 (by 0.2% and 2.7%, respectively).”
  • “Confidence of municipal finance officers has waned. Although the majority of finance officers (69%) are confident in the fiscal position of their cities, widespread optimism hit its peak in 2015.”

Is Your 2018 Salary and Bonus Package Competitive?

Posted on October 10, 2017

Is your 2018 salary and bonus package competitive? Find out with the 2017 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports.

These valuable reports are the national standard allowing commercial real estate businesses to stay current on salaries, bonuses, and benefits for CRE professionals from executives to entry-level positions.

The reports include:

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To Survive, Malls Must Reposition

Posted on October 5, 2017

A report by CBRE, “What’s Wrong with American Shopping Malls?” finds retailers with low-growth rates, such as department stores, occupy a majority of U.S. shopping malls’ gross leasable area compared to retailers with higher-growth categories such as restaurants and home furnishings. This disparity, according to CBRE, indicates malls should lease to different retailers to stay competitive.

However, shifting the merchandise mix will take time. The report states retail leasing structures, such as reciprocal easement agreements that require a retailer’s permission before modifications are made to the shopping center, and the overall reluctance to change among department stores will delay the process. Those who “shift the tenant mix toward higher-growth, lower e-commerce penetration spending categories can create room for revenue growth.” CBRE also notes super-regional malls, characterized by larger sizes and diverse combinations of tenants, have demonstrated a sharp increase in net operating income over regional malls during the past four years.

Medical Office Space May Defy Market Volatility

Posted on September 28, 2017

According to CBRE’s inaugural report on the U.S. medical-office market, the steady demand for and investor confidence in healthcare-related workspace indicates it may be a “resilient sector, able to weather economic downturns and political changes.” The age 65-and-over population – now accounting for the highest per-capita healthcare spending – will nearly double by 2055 and drive an increased need for medical office space. Some findings include:

  • “Cost containment is driving health care industry consolidation and fueling demand for less expensive delivery settings, such as medical office buildings and urgent-care facilities, as well as new technologies that can produce better patient outcomes at lower costs.”
  • “Absorption of medical office space has outpaced new supply for the past seven years, lowering the segment’s national vacancy rate to 8% as of Q1 2017.”
  • “Rising investor confidence in medical office space has resulted in increased transaction volume in the segment, which reached nearly $10 billion for the year ending Q1 2017 and pushed cap rates to a record-low average of 6.8%.”

The report includes 30 U.S. market profiles and identifies metropolitan areas with low concentrations of healthcare employment and rapidly aging populations, including Atlanta, Las Vegas and Denver. According to the report, these markets will need to ramp up healthcare employment to meet current and future needs.

JLL Predicts Where and How We'll Shop

Posted on September 8, 2017

Shoppers today have three main options when they’re looking to buy: Go to a brick-and-mortar store, shop online but pick up at a brick-and-mortar store, or purchase online and have the product delivered. In a report, “Bagged or Boxed,” JLL explains that “the way shoppers value time, touch and money drives on- or offline purchasing,” and predicts which businesses are well-positioned for future growth.

When it comes to physical stores, JLL writes that restaurants, off-price retailers, dollar stores and furniture stores should have the best opportunities to succeed. All provide either an experience or a price that online shopping can’t surpass.

JLL expects that several types of stores will maintain locations, but also step up their online presence. It points to grocery, apparel, sporting goods, and toy stores as examples of categories that are seeing a move toward more online shopping.

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Top Office Markets Solid in Second Quarter

Posted on September 7, 2017

In its latest “U.S. Top Office Metros Snapshot,” Colliers reports that “fundamentals in the 10 major office markets in the U.S. largely remained solid during the second quarter.”

The report finds that vacancy rates were unchanged in three markets, increased in four markets, and declined in three others. “Rents held firm in six of the markets tracked in this report. At the same time, two key factors point to upward pressure on vacancy rates: tenant downsizing and new supply,” the report states.

Some details from the report include:

  • “Three markets – Manhattan, the San Francisco Bay Area and Seattle – have office vacancy rates well under 10% and saw no increases in the second quarter.”
  • In Houston, vacancy is back above 20 percent.
  • “Concerns over the impact of new supply in San Francisco and Seattle are receding, but two markets – Los Angeles and Washington, D.C. – remain exposed to construction risk.”
  • Boston and Dallas markets remain solid.