Women are slowly but surely expanding their roles in the commercial real  estate industry, from brokers and property managers to CPAs — and yes — even  CEOs. Yet the majority of women continue to bump into the glass ceiling in what  remains a male-dominated profession.

Photo credit: Bill Klotz, Finance & Commerce

“At the end of the day, if one-third of the commercial real estate  professionals are women and only 4 percent are the top professionals, there is  absolutely something that is not working,” said Collete English Dixon, a  principal in transactions at Prudential Real Estate Investors in Chicago.

Across all disciplines, women are making it to the middle ranks such as vice  president, but they are having a difficult time getting past that level, she  said.

Continue reading article on the Finance & Commerce site.

However, in recent years the IRS has broadened the definition of what types of companies can convert to REITs. The Corrections Corporation of America, which owns and operates over 40 prisons across the country is one such company which recently converted to a REIT. The company argued that the money it collects from governments for holding prisoners is essentially rent. Thanks to the switch in tax designation, Corrections Corporation expects to save approximately $70 million a year in taxes. Similar moves have been made by companies which operate cell phone towers, outdoor advertising facilities such as billboards, and documents storage facilities. Even Penn National Gambling, which operates 22 casinos, recently won approval to change to REIT status.

While the IRS had for several years made policy decisions which increasingly broadened the scope of what can be considered a REIT, it may be backing away from that trend. Last week three firms in the midst of the process of converting to REITs were notified by the IRS that their moves will be delayed while the agency studies the standards it uses to define “real estate” for purposes of qualifying as a REIT. Iron Mountain Inc., a document storage company, is one of those firms and is a good example of how corporations have stretched the definition of “landlord” and “real estate” in an effort to achieve favorable tax status.

Despite the recent hold on REIT conversions and the IRS internal study, some analysts believe the agency will maintain its consistent stance of a broad definition of real estate. However, analyst Ross L. Smotrich at Barclays worries that the rush of conversions to REITs could attract unfavorable attention from Congress in an era of constrained budgets and political talk about “tax loopholes.” In the 1980′s, Congress limited the use of master limited partnerships after a wave of companies used that structure to obtain tax-exempt status. Might Congress do the same with REITs?

Spencer Agnew attended the 21st annual Congress for the New Urbanism in Salt Lake City. He will do a series of short blog posts highlighting ideas and trends from this national gathering of urban planners, architects, and real estate professionals.

Day two at CNU 21 featured a discussion of “Missing Middle” housing. Missing Middle housing includes residential buildings which are somewhere between a single family home and a mid-rise multifamily building in density. This includes building types such as  duplexes, triplexes, bungalow courts, townhouses, and courtyard apartments. Although a common feature in pre-war historic building stocks, these housing types have become much less common (hence the “missing”). Modern building codes,  zoning regulations, and subdivision regulations often make it impossible to build these housing types, even in areas where they are part of the existing building stock.

A primary benefit of Missing Middle housing is that it provides more choice in housing types while blending in to existing single family neighborhoods. They are typically more affordable than a single-family home due to being smaller and sharing communal parking and lawns. However, unlike mid-rise apartment buildings, Missing Middle housing can blend right in to single family neighborhoods. Daniel Parolek of Opticos Design noted that these building types typically have a residential unit density in the range of 16 to 30 units per acre but are often perceived as being less dense due to the being smaller in scale.

Duplex – Portland, OR

Several market trends tend to favor the development of Missing Middle housing, should zoning and building codes be modified to allow it. University of Utah demographer Christopher Nelson has found the national demand for small lot and attached housing exceeds supply by some 35 million units. Christopher Leinberger at the Brookings Institution also researched housing preferences and found that while 30% to 40% of buyers want to be in walkable urban neighborhoods, only 5% to 10% of the housing stock is providing that in any given housing market. Another factor in favor of smaller housing types is the increasing trend towards smaller households and fewer households with children.

Site Plan- Ericksen Cottages – Bainbridge Island, WA (photo credit: The Cottage Company)

Linda Pruitt of the The Cottage Company (based in Seattle) has had success building several “cottage court” developments in the Seattle area. She noted that many residents of her cottage court developments are looking for a detached housing option that is smaller in size and requires less maintenance than a single-family home. The cottage court concept meets that need by grouping several small detached houses around shared lawns and parking. Residents get the benefit of their own detached home, and association fees take care of the lawn and parking maintenance. The most prevalent demographic groups in The Cottage Company’s cottage court housing tend to be single women, empty nesters, and young professional couples.

Greenwood Avenue Cottages – Shoreline, WA (photo credit: The Cottage Company)

Several panelists noted the need for regulatory reform to allow housing builders to meet market demand for Missing Middle housing. Rene Oehlerking of Garbett Homes compared regulation of the housing market with other industries, asking “what if the FCC regulated how large or small cell phones could be?” Because of stringent regulations, it is difficult for housing builders to innovate and adapt to changing consumer preferences. “We don’t know what the buyer of tomorrow will want, so why not let producers innovate and housing products evolve?”

Spencer Agnew attended the 21st annual Congress for the New Urbanism in Salt Lake City. He will do a series of short blog posts highlighting ideas and trends from this national gathering of urban planners, architects, and real estate professionals.

Day one at CNU 21 featured a lively discussion by a panel of experts on form-based codes. Form-based codes are a form of land-use regulation that “address the relationship between building facades and the public realm, the form and mass of buildings in relation to one another, and the scale and types of streets and blocks.” Form-based code ordinances often include diagrams and visuals that display specific architectural design elements that are allowed. This approach to land-use regulation differs with conventional Euclidean zoning, which focuses on the micromanagement of land uses and the regulation of development intensity through abstract metrics such as floor area ratio, setback distances, and parking ratios.

Form-based codes have become popular with advocates of New Urbanism because they focus on the quality of the built environment rather than on the location of different types of land uses. Conventional zoning is often associated with suburban-style land use and development, due to the tendency of use-based zoning to separate land uses and minimize density while ignoring urban design. However, they have been slow to take hold among municipal governments; there are currently about 280 adopted form-based code ordinances in the U.S., impacting just 3% of the national population. Many of the adopted codes are optional, meaning that developers may choose whether to seek entitlements through the form-based code or through the pre-existing use-based zoning.

Form-based codes were intended to simplify land use entitlements and clarify expectations. If a developer proposed a project that met the form-based criteria, they would not need to apply for the various variances for parking, setbacks, and FAR which are commonly necessary with use-based zoning. Theoretically, the regulations would be simpler and easier to understand, and review processes would be faster. That hasn’t always turned out to be the case however. Despite the original intent to keep codes short and simple, many adopted form-based codes have been lengthier and more complex than the previous use-based zoning codes. Sandy Sorlien of the Transect Codes Council pointed out that many codes become bloated through the creation of too many zoning sub-districts or through the inclusion of explanatory language that is non-regulatory.

To date, there are no adopted form-based codes in Minnesota. The most prominent example of a large-scale adoption of form-based zoning is the Miami, which implemented its Miami 21 form-based zoning initative in 2010.

Event Details:
Women in Commercial Real Estate Conference
Thursday, June 6, 2013 8:00 a.m. – 11:30 a.m.
University of St. Thomas, Opus Hall room 201
MNCREW member rate: $45, Non-member rate: $65
Register Today!

This program has been approved for 2 hours of real estate agent/broker continuing education credit through the Minnesota Department of Commerce.

Conference Schedule:

8:00 a.m. – 9:00 a.m.
Registration, Breakfast, and Networking

9:00 a.m. – 10:00 a.m.
Keynote Presentation

10:00 a.m. – 10:30 a.m.
Networking Break

10:30 a.m. – 11:30 a.m.
Panel Discussion

About our presenters:

Keynote Presenter

Collete English Dixon, vice president of transactions, Prudential Real Estate Investors

Collete English Dixon’s work ethic is legendary in the commercial real estate business. She began her career at Prudential in 1979 as an asset management analyst. Today, as the vice president of transactions, Collete is responsible for a team who has completed more than $2 billion in portfolio assets. During her presentation, Collete will give an update on capital markets and share the CREW network research results. She will also discuss her career story and share lessons learned along the way.

Women in Commercial Real Estate Panel

Moderator: Valerie Doleman, vice president of marketing and growth strategy, Guaranty Commercial Title, Inc.

Panelists:

• Helen Brooks, former vice president, Colliers Towle Real Estate
• Annalisa Cariveau, real estate developer, Alpha Theory, LLC.
• Gina Dingman, president and NAI director, NAI Everest
• Keri Kindelspire, director of business development and marketing, Anderson Companies

With careers spanning over five decades, our panelists will discuss how the commercial real estate industry has evolved over time for women. Representing three different generations, our panelists will share experiences from their past and present, and discuss where they see the future of the commercial real estate business.

Register Today!

Challenges remain for retail real estate, however. Although rent growth was positive, it was nevertheless slow and is unlikely to increase substantially anytime soon. Net retail absorption nationwide in the first quarter was 17 million s.f., down from from the year before. Many retailers have continued to shed stores and consolidate to the strongest locations. Demand for power centers is especially threatened as “category killer” retailers like Best Buy and Staples face increasing competition by Amazon and other online retail. In fact, Susan Mulvee of Property & Portfolio Research predicted that within many power centers will go dark within 10 years.

On the investment side, the single-tenant net lease market in retail properties with national credit tenants is going strong.  Brain Capo of Marcus & Millichap’s Orlando office indicated that triple-net deals are not lasting long on the market. Capitalization rates have compressed by 50 basis points in the last two months, with numbers approaching the pre-recession boom.

On the whole, the survey suggests that demand will continue to rise for infill residential development that is less car-dependent, while demand could wane for isolated development in outlying suburbs. The survey found that among all respondents, 61 percent said they would prefer a smaller home with a shorter commute over a larger home with a longer commute. Of the three major generations in the report, Millenials (or Gen Y) – the largest generation and the most  diverse – is the generation that is likely to have the most profound impact on land use. Numbering 80 million and generally not yet fully immersed in the housing and jobs markets, Millenials have yet to fully make their mark on the urban landscape through their preferences for things such as mixed-use development, proximity to shopping and dining, and walkability.

A majority of American who plan to move in the next five years want proximity to shopping, work, and activities (Source: ULI)

Sixty-three percent of Millenials said they plan to move in the next five years, along with 63 percent of African Americans, 54 percent of Latinos, and 56 percent of those currently living in a large city. The survey found that these groups prefer good transit, short commutes, diversity in housing choices, and mixed-use communities. According to ULI, these different demographic cohorts are all growing in number, and together are creating a significant market shift toward compact, mixed-use development that is different than the types of land uses that were built to meet the demands of previous generations.

Other key survey findings noted by ULI:

• The appeal of homeownership remains strong: Seventy-one percent of all respondents said buying a home is a good investment, despite the recent housing crisis and associated decline in home values.
• Half of those with no access to buses and trains were dissatisfied by this situation.  Fifty-two percent of the population said that convenient public transportation was important.
• Safety and high-quality schools are the most sought-after community attributes: Ninety-two percent of respondents ranked neighborhood safety as the most important attribute; good schools ranked as the second highest at 79 percent.
• Having space and proximity are equally important: 72 percent of the survey participants said having space between neighbors is a priority; yet (somewhat contradictorily) 71 percent placed a high value on being close to employment , schools, and healthcare facilities.

Check out the full report here.

DEED May 2013 Jobs Report

The Twin Cities Metro Area has bucked the statewide trend, having added 26,000 jobs over the past year. A market report by Marcus & Millichap predicts that the metro will add 49,000 jobs during 2013, of which a significant number will be in the health services sector. This employment growth, couple with stronger renter demand, has kept multifamily vacancy in the range of 2.5%, among the lowest rates in the nation.

The Twin Cities metro has added jobs every year since 2009 (source: Marcus & Milllichap)

Multifamily vacancy has remained low despite increasing supply (source: Marcus & Millichap)

The new $1 billion Vikings Stadium, set to open in 2016

Around the same time the stadium opens, a development proposal for several blocks west of the stadium could be completed. On Tuesday, Ryan Cos. unveiled a development plan for 5 blocks of property currently owned by the Star Tribune. The proposal includes two 20-story office towers, 400 units of housing, 40,000 sf of retail,  and a new 9 acres park connecting with the Vikings Stadium plaza area. Part of the proposal is $65 in bond money from City of Minneapolis to pay for a new parking ramp to be shared by the stadium and office buildings.

Ryan Cos.’ mixed-use proposal for 5 blocks in Minneapolis Downtown East includes a 9 acre park and two 20-story office towers

The Ryan proposal is anchored by the two office towers, which will have a combined 1.16 million square feet of space to accommodate about 6,000 employees. Wells Fargo is rumored to be the potential primary tenant for the offices, but they have yet to sign on to the deal. The San Francisco-based bank employes 20,000 people in Minnesota and currently occupies 2 million sf of space in downtown Minneapolis in several buildings, including its main base at the 56-story Wells Fargo Center (currently 98% occupied).  In a move to improve efficiency, Wells Fargo has actually cut about 18 million square feet from its corporate real estate footprint in the last few years despite adding employees. Any potential occupancy of these new towers would likely involve consolidating employees currently based elsewhere in downtown and at 16 locations throughout the Twin Cities metro.

The Ryan Cos.’ $400 million development proposal for Star Tribune land west of the Vikings Stadium includes a new skyway link to the Vikings Stadium

 Prices are up and the Inventory of Homes for Sale Remains Low

Housing data in March continues to show improvement compared to the same period last year. The median price of a traditional (non-distressed) home sale was $209,900, an increase of 2.4% over the $205,000 reported in February and a 6.04% increase over the March 2012 median price of $197,950. The median price of $209,900 is the highest median price seen since last summer. The volume of closed sales in March 2013 was 3,732, up considerably from the 2,839 recorded in February 2013 and close to the same as the 3,692 recorded in March 2012.  The number of existing homes available for sale remains at historically low levels. In March of 2013 there were 12,941 homes available for sale. This compares to 18,291 in March 2012 and 23,467 in March 2011. See the table below for previous year’s March inventory levels. In March of 2013 there were only 3.47 homes for sale for every closed sale. Since the beginning of 2012 the inventory level of homes for sale has been consistently running 25% – 30% below the previous year’s level.

 New Construction Continues to Surge

While the number of new housing starts is a long way from the levels seen in the mid-2000’s, activity in the first quarter of 2013 is substantially improved. The low number of homes for sale along with a continued improvement in general economic conditions are creating opportunities for new home builders as they are able to add to the supply of homes available to potential buyers. The data shows that the construction and sale of new homes continues to play a larger role in the Minneapolis / St. Paul housing market. Year to date through April 11 of 2013 there were 1,177 building permits issued for single family home construction. This is a 54% increase compared to the 763 permits issued during the same period in 2012. The closed sales data in March shows a similar trend. The sale of newly constructed homes in March is up 12.2% compared to March of 2012.

 Employment plays a major role in household formation.  As employment increases more people will be moving into places of their own. The unemployment rate in Minnesota is well below the national average at 5.5%. The state added 50,800 new jobs in the last 6 months. These positive employment indicators will increase the rate of household formation, requiring additional housing units. Since the inventory of existing homes for sale is expected to remain at historically low levels in the near term future, look for continued growth in the number of new homes built in 2013.  The increase in the construction of new homes is beginning to create a shortage of finished lots. The number of vacant developed lots in Minneapolis / St. Paul has been decreasing over the last several years. At the end of the first quarter of 2012 there were 24,559 vacant developed lots in the Twin Cities metro area (a 101 month supply). That number had decreased to 24,559 (a 58 month supply) by the end of the first quarter of 2013. As the shortage continues home builders are finding they have to pay premium prices for desirable lots.

 The Percent of Distressed Sales Continues to Moderate

 When comparing the total number of closed sales from year-to-year there is one important difference: the growth of traditional sales. In March of 2012 there were 1,885 traditional, non-distressed sales (51.8% of the total sales); in March 2013 there were 2,318 traditional sales (62.1% of the total sales), an increase in the percentage on non-distressed sales of nearly 20%. The past few months of traditional sales totaling at least 50% of all sales is an encouraging sign that distressed properties are becoming less numerous. As we move into the spring and summer of this year we should see a stronger housing market dominated by traditional sales. Look for the percentage of distressed sales to continue to moderate as we move into the summer selling season. As the economy continues to improve there will be fewer foreclosures and short sales on the.  Increasing median sale prices means that fewer homeowners will be “underwater” and an improving employment situation will lead to fewer borrowers becoming seriously delinquent on their mortgages.

 The UST Traditional Sale Composite Index decreased again for in March (down 1.7%), moving from 990 in February to 973 in March. The decline is a reflection of a combination of several factors. The first is that the index is based on a 3 month moving average. Even though the median sale price of a traditional home increased in March, the index is being influenced by the declines that occurred in January and February. Secondly, the index has also been influenced by the very low number of homes available for sale. That being said, it should be noted that despite the fact the index has been declining for the last several months, throughout that period it has remained well above the levels recorded in the previous year. March’s Traditional Sale Composite Index of 990 is 6.8 % higher than the 911 recorded in March 2012.

The UST Residential Real Estate Short Sale Composite Market Health Index was 779 in March, a 3.6 increase compared to one year ago.

The foreclosure market’s health as represented by the UST Residential Real Estate Foreclosure Composite Index increased slightly in March, moving from 701 in January to 703. This increase was driven by an over $18,000 increase in the median sale price of foreclosed homes between February at $116,500 and March at $134,900.The index is up 14.7% compared to March 2012 and has recorded year over year increases for each month of the preceding year.