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A Seamless Blend of Retail and Recreation

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. 

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A 1950s-Era Mall Turned Inside Out

Originally published in the Fall 2022 Issue of NAIOP's Development Magazine by Patrick Finucan, Sam Bennett, and David Kitchens.

To compete with the rise of e-commerce, traditional shopping malls are evolving to stay relevant and offer experiences that can’t be found online. Recognizing the central location of most malls, more owners are executing major redevelopments of these aging monoliths, transforming them into compelling, destination-worthy mixed-use environments that reflect the needs and wants of the communities they serve. 

One example of this redevelopment strategy in action is the recent renovation of Ballston Quarter, a formerly enclosed shopping mall in Arlington, Virginia, a few miles outside of Washington, D.C.

Over the past 70 years, the site where Ballston Quarter is located has gone through several iterations. From the rise of parking garages to the advent of experiential retail, this regional mall has lived through generations of retail revolutions and undergone two renovations to ensure its continued relevance. 

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Retail-industrial Trend Poised to Spark Real Estate Innovation

Vans

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.


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What the Urban to Suburban Shift Means for the Office Sector

Office

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.

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The Unexpected Challenges (and Solutions) of Multilevel Warehouse Design

Costco
  • By Russ Hazzard, Jonathan Chang, Development Magazine (photo of Vancouver, B.C. Costco by Raef Grohne)

Experiences in Canada and Asia provide case studies for building these complex properties.

Over the past 15 years, multilevel warehouses — particularly those used for retail purposes — have been a growing trend across Asia and, more recently, in the United States. However, some challenges accompany their design and construction that are not encountered in the traditional approach to large-format retail. With operational criteria at the top of the list, these challenges vary heavily based on several factors, including location, footprint, environment, jurisdictional requirements, and cultural and community influences.

The increase in demand for and construction of multilevel warehouses has unearthed numerous unique considerations not present in traditional warehouse environments. These challenges — each intricate in their own right — have required creative solutions and careful programming to successfully bring each project to life.

Parking and Vehicle Flow

One of the most critical design challenges for vertical warehouses is the traffic flow of vehicles and the structure’s parking. While the goal is to keep the sales level on a single floor for ease of operations and the consumer’s shopping experience, parking for multilevel warehouses can reside either above or below grade. Both options have pros and cons: Below-grade parking requires excavation, which can increase costs and complications. However, it provides a solution for lot coverage or height restrictions in situations where those apply. Above-grade or rooftop parking is preferred as it saves both construction time and money.

Customized resolutions to optimize vehicle traffic flow and increase ease of parking have also been employed, varying from warehouse to country to country. For example, in Sinjhuang, Taiwan, indication lights for open parking spaces are used to determine capacity at a glance. In Suzhou, China, car ramps at the entrance steer customers directly up to each floor, allowing them to bypass complete levels. Larger-than-regulation parking spaces — typically very compact in Asia — are also used, granting customers peace of mind. There is no need to worry about maneuvering around tightly packed vehicles in the garage. As an added benefit, large spaces also increase vehicle flow; running in and out of an area is completed in one move vs. two or three.

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NAIOP on Carried Interest and Update on Senate Passage of Reconciliation Bill

Last week, the U.S. Senate passed the Inflation Reduction Act of 2022, a $740 billion budget reconciliation measure with provisions to address climate change and energy security, extend federal healthcare subsidies, and allow Medicare to negotiate prescription drug prices. As we informed you last week, the bill, which had been negotiated by Senate Majority Leader Charles Schumer (D-NY) and Senator Joe Manchin (D-WV), contained a proposal changing the taxation of carried interests that would have harmed the commercial real estate industry and real estate entrepreneurs.

When the Schumer-Manchin agreement was announced, NAIOP and NAIOP Arizona, along with our national real estate allies, mobilized to support Senator Kyrsten Sinema (D-AZ) in her efforts to oppose the proposed changes to carried interest. In order to ensure her vote, the proposal was dropped from the bill before the legislation was brought up for floor debate.

We are gratified that the concerns of NAIOP and the real estate industry were considered on this very important issue. For more than a decade, NAIOP has successfully opposed various proposals to alter the tax treatment of carried interests, or “promotes” as they are known in real estate. While characterized in the media as affecting Wall Street hedge fund managers, these tax increases would have had a much broader economic impact, impacting real estate partnerships, the venture capital industry and others. We have been engaged with policymakers long before this latest proposal was introduced, and our members’ support has been extremely helpful.

Senator Sinema promised to continue working with Senator Mark Warner (D-VA) to develop legislation reforming carried interest taxation. I want to assure every NAIOP member that, on this and the other important issues affecting commercial real estate, we and our NAIOP chapters will continue our strong advocacy on behalf of you and our industry.

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City Council Members Meet with NAIOP Charlotte for LWAL

Last week, NAIOP members met with City Council Candidates Dimple Ajmera and Marjorie Molina to discuss important issues impacting Charlotte’s CRE industry.

LWAL two

The Lunch with a Leader series provides NAIOP Charlotte members an exclusive opportunity to meet and interact with key leaders in our community. Look for upcoming NAIOP Charlotte fall events here.

LWAL one

UDO Meeting Set For July 11; CLT Water Plan Review Back On

REBIC's Rob Nenfelt and his team put together this week's Two For Tuesday and UDO takes center stage early next week.

UDO - Public Hearing Scheduled for Monday

The Charlotte City Council has scheduled a public hearing on the proposed Unified Development Ordinance (UDO) for Monday, July 11. The Council Action Review begins at 5:00 pm followed by the Public Forum/Business meeting at 6:30 pm. An agenda should be available here by Friday afternoon. Click here to sign up to speakRebic Logo

Also, Planning Staff has just released responses to public comments submitted prior to last Thursday's deadline. Additional changes will be reflected in the next and likely final draft when it is released which will occur prior to the expected vote on adoption in late August. Here's a link to the page containing the Second Draft Public Comments - With Staff Responses.

For additional UDO resources, please visit Charlotte's Unified Development Ordinance (UDO) - (charlotteudo.org).

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Vacant Storefronts Can be Repurposed into Retail Incubators

Retail incubator

Vacant Storefronts Can be Repurposed into Retail Incubators

They can provide an immediate boost in shopping districts and grow future businesses into long-term tenants.

  • Written by Ilana Preuss, Development Magazine

The COVID-19 pandemic has left America’s retail districts pockmarked with empty storefronts, but there is a creative solution. These vacant spaces, which often can be purchased or rented at reduced prices, are prime targets for conversion into retail incubators.

Retail incubators, like business incubators, nurture new or small-scale entrepreneurs during the startup phase. They mitigate some of the challenges of opening a business by providing financial and technical assistance, such as the basics of marketing and business plans. Tenants typically share space, ideas and operating expenses in locations that they could not otherwise afford. Many spaces have flexible or temporary lease terms. Some allow for small-scale manufacturing and hold community events, such as product demonstrations, fashion shows and art openings.

In addition to real estate, retail incubators provide fledgling businesses with valuable resources such as technical and financial assistance.  

According to the U.S. Chamber of Commerce, new business applications in the United States set an all-time record of 5.1 million in 2021. At the same time, the pandemic has led to consolidation of space and locations by major retail brands, which reduced the prospect of attracting businesses. The challenge for small businesses is they can’t immediately fill the footprints of major store closings. However, they can make temporary use of retail space to establish their businesses, and occupying formerly abandoned stores can help energize struggling downtowns.

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Permit Reform Legislation Advances Following NAIOP’s N.C. Advocacy Day

BY TOBY BURKE,   

Members from NAIOP’s three chapters in North Carolina traveled to Raleigh last week to advance the priorities of the commercial real estate development industry in meetings with state lawmakers. The top priority for NAIOP of North Carolina, the state alliance of NAIOP chapters, is the passage and enactment of House Bill 291, permit reform legislation sponsored by State Representative Jeff Zenger.

Local building permits are an essential and fundamental requirement for the development and improvement of commercial and residential properties. However, the processes for obtaining these permits can vary by city and county in North Carolina. These variations lead to uncertainties and delays in projects moving forward, which can impact the costs, financing and contractional relationships with contractors and providers of construction equipment and materials.

The enactment of House Bill 291 would bring reforms to the permitting process similar to those advocated by our local chapter in Georgia which were ultimately enacted into law in that state. These reforms to the local permitting process bring more predictability and accountability, reducing uncertainty and unnecessary delays. Core elements of the bill include:

  • A local permitting entity has 21 days in which review the plans.
  • 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.
  • If the local permitting entity is unable to meet the time parameters, the applicant or inspections department may seek approval from a certified third-party (engineer) or the Department of Insurance.

The North Carolina House of Representatives passed House Bill 291 in May of 2021 on bipartisan vote of 79-33, sending the bill to the state Senate. The legislation was eventually sent to the commerce and insurance committee in March for their consideration. Our meetings last week focused on urging Senate leadership and the committee chairs to move this important legislation forward before adjourning for the year as early as the end of June. NAIOP of North Carolina’s advocacy played a key role in HB 291 being scheduled the following day for a hearing before the insurance committee the subsequent week.


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Ports to Trucks: Overcoming Supply Chain Challenges

 

originally pusblished by KATHRYN HAMILTON, CAE  for NAIOP National with permission to share:

Supply Chain

 

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Newsletter Winter 2021: Office Demand, Proptech, Adaptive Reuse and More

 

NAIOP Research Pic

Although office net absorption remained negative throughout 2021, it is gradually climbing toward the positive side of the scale.
Office utilization rates remain low due to continued concerns about coronavirus transmission, and the Omicron variant has also introduced a new degree of uncertainty.
However, while a long-term increase in remote and hybrid work arrangements is likely to reduce demand for office space, the authors of the latest NAIOP Office Space Demand Forecast predict this will be more than offset in coming years by employment growth in office-using industries.
 
Demand for new office buildings is also favorable, as new builds offer the flexible work environments demanded in today's more uncertain world.
 

People picVIEWPOINT

"Investors funneled $9.5 billion into Proptech this year. What technologies do you see your business potentially implementing in the future?"

See replies.

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The Outlook for Capital Markets and Industrial Real Estate

 

originally published by SHAWN MOURA, PH.D. for NAIOP National

Capital Market

Low cap rates and rapidly rising rents reflect industrial real estate’s status as the leading sector in commercial real estate development. Record levels of capital are flowing to industrial real estate while tenants are willing to pay higher rents to secure additional inventory and shorten delivery timelines.

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E-Commerce Drives Industrial Development in Q4 2021

 

originally published by LUCIAN ALIXANDRESCU for NAIOP National

warehouse

After the initial shock of the pandemic, industrial real estate emerged as one of the asset classes least affected by the ensuing economic downturn. While the causes are multifaceted, the sudden spike in demand for products ordered and curbside pick-up meant that retailers — both online and brick-and-mortar — scrambled to secure the space they needed to fulfill the influx of new orders.

Read the Full Article Here!

Vacancy Rates at Less Than 15% and a Rise in Average U.S. Office Listing Rates

 

originally published by COMMERCIALEDGE TEAM for NAIOP National

Office Pic

The Delta variant of COVID-19 has continued to delay the return-to-work plans of many companies. Still, rising vaccination rates and declining case numbers have provided hope for many companies. Anyone worried about the future of office work can look at the continual investment of big tech into the industry to feel confident that offices are far from a thing of the past.

Read the Full Article Here!

Pandemic, Shifting Markets Creating Risks, Opportunities for Capital Markets

originally published by JEFF ZBAR for NAIOP National

Capital Markets

While some assets in the real estate market have been jolted by pandemic-related fallout, some investors, managers, and property owners will look back on the COVID-19 era as the “golden era” of real estate investment.

While some sectors have struggled, like office and retail, certain sectors have seen tremendous growth. Managers with operational expertise with the right property type have found success.

Read the Full Article Here

The Future of Goods Distribution and the Supply Chain

originally published by Trey Barrineau for NAIOP National

Card over Bridge

In the wake of the COVID-19 pandemic, supply chain problems have become pervasive. In fact, things are getting so bad that many fear they could imperil the all-important holiday shopping season this year.

Michael Landsburg, chief development officer with NFI Real Estate, said there are currently 70 cargo ships anchored off the ports of Los Angeles and Long Beach, California. A month ago, there were about 40.

Read the Full Article Here!

Alternative Means and Methods for Maintaining Project Momentum

originally published by BRIELLE SCOTT for NAIOP National

Contractor Pic

The post-pandemic construction boom has taken many forms. E-commerce and big box retailers are developing across the country, while at the same time, construction projects that were postponed during the pandemic have resumed. However, the lack of workforce at manufacturing facilities last year combined with the high demand for materials have led to price increases and lead-time delays.

In a session at CRE.Converge this week, a panel of experts led by Bill Finfrock, president, FINFROCK, shared some of the strategies used in construction to keep projects moving forward despite these challenges.

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Asset Managers Can Play a Key Role in Tenants' Return-to-workplace Plans

Originally published by Rob Naso for NAIOP Development Magazine Summer 2021 Issue

A new framework for mitigating disease in the office focuses on air quality, changing behaviors and building occupant trust.

The COVID-19 pandemic has redefined the role that office landlords play in creating safe, healthy work environments. While most office workers packed up their laptops and headed home to ride out the pandemic, building owners and property managers had to pivot quickly to elevate safety measures for the essential workers who remained, in an environment with fast-changing public health guidelines. Now, they face the next stage of recovery — ensuring tenants feel comfortable returning to the workplace as vaccination rates increase.

The landlords that return their buildings to thriving, active communities will be those that expand the definition of their role to also become socially-minded strategists charged with creating safe and healthy environments, setting the stage for tenants to safely return to the workplace. Positioned at the forefront of containing future outbreaks while enabling businesses to resume activity, the responsible asset manager has become the tenants’ partner in their return-to-workplace strategy.

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Industrial Solutions for E-commerce Grocery Fulfillment

Originally published  by Scott Murdoch for the Summer 2021 Issue of NAIOP Development Magazine.

The pandemic forced the industry to adapt quickly to meet soaring demand.

While grocery e-commerce was growing prior to the pandemic, the sector saw staggering market penetration over the course of 2020 and beyond. Concerned about safely accessing food, consumers across all demographics turned to online grocery shopping as a convenient, safe option.

A survey by LEK indicated that food e-commerce made up 3%-4% of total grocery retail sales before the pandemic and that overall penetration would reach 15%-20% by 2025. But in its February 2021 Online Grocery Report, Business Insider projected online grocery adoption will reach 55% in the U.S. by the end of 2024. Consumers have clearly grown accustomed to the convenience and safety of grocery e-commerce. 

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