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Development, Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Twin Cities Real Estate

Latest Survey of Twin Cities Home Builders Finds Them Optimistic for 2018, but with Some Concerns

St. Thomas’ fourth semiannual survey of 35 industry leaders measures sentiment and is designed to be a forecasting tool.

 Leaders in the Twin Cities single-family home-construction industry are generally optimistic about market conditions for the coming year although they have concerns about increasing mortgage rates and higher costs of land and building materials. That’s according to a new survey conducted by the University of St. Thomas Shenehon Center for Real Estate in partnership with the Builders Association of the Twin Cities.

The Twin Cities Home Builders Survey is patterned after St. Thomas’ Minnesota Commercial Real Estate Survey that began in 2010. The Home Builders Survey polls the same panel of 35 industry leaders annually in June and again in December about their expectations for the upcoming year in six key areas of the housing market. These experts are asked to assign a number of zero to 100 for each of the six questions. A midpoint score of 50 is neutral; scores higher than 50 indicate a more favorable outlook and scores lower than 50 indicate a more pessimistic outlook.

“The industry leaders we poll every six months are actively engaged in studying both the demand and supply side of the housing market,” said Herb Tousley, director of real estate programs at the university. “Since they are involved in creating new housing units and adjusting supply-to-demand conditions, these individuals are close to the actual changes taking place in the market.” “These results align closely with what we are hearing from the market and our members.” Said David Siegel, Executive Director of the Builders Association of the Twin Cities. “While there is a great need for residential construction in the Twin Cities, there are still several factors holding it back including land prices, the regulatory burden and a shortage of labor.”

Here are the scores for each of the six questions that were asked in August 2017:

Housing Starts: 65

This score increased increased from 61 in December 2016 to 65, it indicates a high expectation that the number of single-family housing starts will show a marked increase in 2018. Last year was one of the best in recent years with about 5,300 permits issued.

Sale Price per S F: 74

This score is even more optimistic than last December’s score of 72. It reinforces the panel’s continued expectations that home prices will continue to increase. The net result is the belief that sale prices will increase at a rate that will more than offset the expected increases in project costs.

Land prices: 23

At 23 this index has decreased sharply from last December’s score of 31 moving even deeper into the pessimistic range. Indications are that the rate of increased land prices will accelerate in 2018. While there may be enough finished lots available, the higher land prices will squeeze profitability.

Availability of finished lots: 60

This index increased from 51 last December to 60 in June reflecting builders increased optimism that there will be an increase in the availability of finished lots in 2018. An adequate supply of well-located finished lots is crucial to the health of the home building industry.

Cost of building materials: 24

The outlook for the expected increases in the costs of building materials continues to persist. This index moved from 29 in December 2016 to an even more pessimistic score of 24 in June 2016. This score is an indication of increased concern by our panelists that much of the gain from increased sale prices and more building starts will be offset by higher costs. These expected increases in costs could depress profitability and could reduce the number of new homes built.

Mortgage rates: 28

This index remains unchanged at 28. It is an indication that the panel continues to expect mortgage rates to increase in the next 12 months. Although mortgage rates increased during the fourth quarter of 2016, most panelists are expecting an additional increase of ¼% to ½% half a percent within the next year. The affordability issues created by higher rates could put a damper on home-building activity.

More Information

Additional details can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html

 

Commercial Real Estate, Development, Economics, Executive Insight Series, Housing, Industry News, Investment Real Estate, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Upcoming UST Events

Real Estate Executive Insight Speaker Series Bob Lux – Inside the Mind of A Developer

 

Real Estate Executive Insight Series

Bob Lux – Inside the Mind of A Developer 

Event Details Tuesday, March 28th 2017 5:30 p.m. University of St. Thomas, Minneapolis Campus Schulze Hall, Room 127

A candid conversation with industry leader Bob Lux, Founder Alatus LLC

Quality real estate development requires innovative thinking. Bob Lux, founder of Alatus LLC, has been in the real estate development and investment business for over 30 years. His company’s mission is to provide innovative solutions and high quality projects by wisely using his team’s talents and strengths to achieve the client’s vision and form a better community.   Lux will discuss the challenges, opportunities and trends in developing residential and commercial real estate in the Twin Cities. Lux will also share his views on the condo market and as the largest private owner of parking facilities in Minnesota Bob will outline his expectations for future parking and infrastructure needs in the downtown area.

Agenda 5:30-6 p.m. Networking 6-7 p.m. Presentation by Bob Lux

Register Today
 
Commercial Real Estate, Commercial Real Estate Index, Development, Economics, Industrial Real Estate, Industry News, Investment Real Estate, Office Real Estate, Real Estate Trends, Retail Real Estate, Twin Cities Real Estate

Semiannual Survey of the Twin Cities Commercial Real Estate Experts Predicts Continued Favorable Market Conditions

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Leaders in the field of Minnesota commercial real estate expect to see a continuation of the favorable market conditions for commercial real estate that we have been experiencing for the past two to three years.

May 2016 Results

The semi-annual Minnesota Commercial Real Estate Survey conducted in May 2016 has produced some interesting results. Overall, the survey continues to indicate a slightly less than neutral expectation looking ahead two years to spring 2018 for commercial real estate. The composite index was recorded at 46. This is the sixth consecutive survey where the composite index has been in the 46 – 48 range. Index values greater than 50 represent a more optimistic view of the market over the next two years, with values of less than 50 indicating a more pessimistic view. Although the composite index level is similar to previous surveys the pattern of the individual indexes in the current survey is very different.

As was done with all ten of the previous surveys, the same group of 50 commercial real estate industry leaders involved in development, finance, and investment were polled regarding their expectations of near-term, future commercial real estate activity. One thing we have observed in the current survey is there is less variation in the responses and that has caused a more uniform response rate reflecting the panel’s increased certainty in their views. The individual indexes are detailed below:

Rent Expectations

Less optimistic outlook that rents will continue to increase at current rates. Market conditions expected in spring 2018 are best described by the price for space (rental rates) and the supply of space (occupancy levels). The index for rental rates has declined from a highly optimistic 66 to a somewhat less optimistic 60. This is an indication of an expectation of a moderation of rent growth over the next two years. Higher rents help to offset the increased costs of new construction. A slowdown in rent growth puts pressure on expected returns that will be achieved by developers and owners.

Occupancy Expectations

A continued neutral outlook on expected occupancy levels. The index for occupancy levels increased slightly from 50 to 52. Despite the increase, the panelists continue in their expectation that occupancy levels will remain steady at current levels. As new buildings have been completed it takes some time for the market to absorb the new space. Over the last 2 years the occupancy index has been drifting downward towards a neutral expectation concerning the demand for space.

Land Price Expectations

Increases in land prices are expected to moderate. The panel’s outlook for land prices reveals an expectation that land prices will increase at a slower rate between now and spring 2018. The land price index has increased (become less pessimistic) for the third consecutive survey moving from 37 last fall to 40 this fall this spring. The low point for the index was recorded at 31 in the fall 2013 survey. This sentiment while still in pessimistic territory indicates an expectation that land prices will moderate their rate of increase during the next two years. Increasing land prices increase total project costs and are a hindrance to new development, making it more difficult to obtain financing and adequate returns for investors.

Building Material Price Expectations

Increases in the price of building materials are also expected moderate.  The spring 2016 survey reveals that for the fourth consecutive survey our panel continues to become less pessimistic about the rate of increase in price of building materials. The building material index moved from a strongly negative 32 to a somewhat less negative 37, reflecting the panel’s opinion that building material price increases are expected to moderate. Since building materials are a major cost component of any development project any improvement in prices will be favorable for future development.

Return on Investment Expectations

Investors return expectations remain unchanged over the next two years. The index for investor’s return expectations has increased slightly for the third consecutive survey at 48. Although this index value is slightly pessimistic, it is essentially neutral.  The consensus among survey respondents continues to indicate that investors expected returns will not change significantly in the next two years. Investors will continue to seek out quality investments but they are being much more diligent about how they price risk and evaluate return when considering their investment options.

Lending Expectations

More equity is expected to be required.  The index for the amount of equity required by lenders decreased significantly, falling from 51 in to 42. This indicates the panel’s strong belief that credit will be available for good projects but lenders will increase their equity requirements in the coming two years. The good news is that more equity should result in better rates and terms; however, the bad news is that in many cases equity is harder to find and more expensive than debt.

 Summary

To summarize the panel is expecting to see a continuation of the favorable market conditions for commercial real estate that we have been experiencing for the last 2 to 3 years, however there will be some differences as to why this will happen. The panel has moved from a positive to a neutral position on occupancy. With all of the new product coming on line it is expected that given a little time the market will be able to absorb all of the new space but while this happens occupancy rates will be depressed in the short run. Additionally, the panel expects to see continued rent growth, however, that growth will be at a slower rate as new product comes on line and is absorbed. Development efforts will be helped by an expected moderation in the rate of increase in land prices and building materials. The panel is also expecting to see lenders tighten their lending standards somewhat. That results in lower loan amounts and higher equity requirements on development projects. Higher equity requirements makes development more difficult since equity dollars are more expensive and using less debt financing tends to reduce the rate of return on a project. Overall, our panelists see continuing activity at or near present levels in most categories of commercial real estate during the next two years.

May 2016 Commercial Survey

Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Multifamily, Real Estate Lending, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

A Brief Summary of the 2015 Twin Cities Housing Market. This Year was a Good Year, What About 2016?

We examine some of the more important questions about the Twin Cities housing market in 2016 and offer some thoughts Houseforsaleabout where the market is headed.

An analysis of Twin Cities real estate data for 2015 through November shows that the housing market is continuing to recover along with the economy; home prices, the number of closed sales, pending sales, new listings, and the percentage of traditional sales (not foreclosures) are all on the upswing.Meanwhile, a historically low number of homes on the market is continues constrain the number closed sales. This has created an imbalance in the market where buyers outnumber sellers and leads to situations involving multiple offers and homes selling above asking price.

Will 2016 bring more of the same? In this month’s Residential Real Estate Report Herb Tousley, director of real estate programs at the university will examine some of the more important questions about expectations for 2016. These questions are;

  • What will happen with median home sale prices in 2016? How long will it take for them to approach pre-crash levels? Look for an increase of 6% – 8% in the median sale price of homes sold in the Twin Cities. **
  • What will happen to the number of homes sold during the year? Look for an increase of 4% – 6% in the number of closed sales in 2016. **
  • What will happen with the number of homes available for sale in 2016? We are expecting an increase in the inventory of homes for sale of 1% – 3% compared to the previous year’s levels. **
  • Will interest rates and mortgage rates continue to rise in 2016 and if so, what effect will it have on the housing market? In 2016 look for rates to drift from just under 4% to slightly over 4% by the end of the year. **
  • What will happen with new housing starts in 2016? Will home builders break out of the doldrums next year?   In 2016 I am expecting an increase in the number of permits issued of about 10%. **
  • What will happen with apartment development and rent levels? Will the market continue to be able to absorb the expected number of units in the pipeline?   Our expectation is that next year will be another good year for apartment developers with an additional 3,800 – 4,000 market rate units being added to the existing stock. We also we expect that the strong local economy and continued employment growth will sustain continued rent growth of 2% – 2.5% in 2016. **

 **For a more detailed explanation of the above answers you can download the complete November Residential Real Estate Report at: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

Real-Estate-Supply-and-Demand-300x259The Residential Real Estate Report is a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at St. Thomas’ Opus College of Business. Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed (traditional-type sales), foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance). More details about the market, including an analysis of distressed-property sales during the winter months, can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

Research for the monthly reports is conducted by Tousley. The index is available free via email from Tousley at hwtousley1@stthomas.edu.

 

 

Best of Real Estate Matters, Commercial Real Estate, Development, Green Building, Historic Tax Credits, Housing Trends, Investment Real Estate, Minneapolis / St. Paul Housing, Minnesota Real Estate Hall of Fame, Minnesota Real Estate Journal, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Urban Planning, UST Real Estate in the News

New Members of Minnesota Real Estate Hall of Fame Announced

The Minnesota Real Estate Hall of Fame, established in 2010 by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business, will add three new members in a morning ceremony Thursday, Nov. 5th, at the Golden Valley Golf and Country Club.

Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members

Dan DolanWells Fargo

For more than 50 years, Dan Dolan has pursued a career in real estate. He was a leader in improving the professional and ethical standards in real estate and was an early promoter and employer of women in real estate sales. His real estate developments include the Evergreen Community, an upscale residential development in Woodbury; and the Oakdale Crossing Business Park.

Throughout his career, Dolan has been actively involved in boards and fundraising, including the merger of Cretin and Durham high schools, fund raising for the University of St. Thomas, and serving as King Boreas XLII in the 1978 St. Paul Winter Carnival. He may be eligible for retirement, but Dolan is just as passionate as ever about real estate development and continues to receive offers of employment in the industry.

Larry Laukka  

Since 1962, Larry Laukka has actively served in all  aspects of the real estate industry, but primarily in the building and development business. Laukka’s experience has included the design, development, financing, construction and marketing of more than 6,000 dwelling units and home sites throughout the greater Twin Cities community, and the management of approximately 3,000 owner-occupied townhomes and condominiums. His leadership roles include president and director of the Minneapolis Builders Association (MBA), senior life director of the National Association of Home Builders (NAHB) and founder of the Minnesota Housing Institute (MHI), which served the real estate industry’s state-wide needs to commercially promote home ownership and legislative action.

In the 1960s, Laukka worked with The Near Northside Re-Development Agency, a community based organization established to guide the redevelopment of the near north side of Minneapolis. The agency focused on the growing need for market rate housing and led to the development of single-family housing, hailed as “The Suburb in the City.”  After being approached by Governer Wendell Anderson, Laukka helped develop the State Housing Finance Agency and chaired the Minnesota State Housing Code Advisory Board until a state-wide building code was in place. Most recently, he served on the Fairview Southdale Hospital board of trustees and chaired the development of its new Carl N. Platou Emergency Center opened August 2015.

James Solem

For more than 40 years, James Solem provided outstanding leadership and tireless work in real estate finance and public policy, supporting the development of rental and ownership housing for low and moderate income households. He was the executive director of the Minnesota State Planning Agency from 1970 to 1978, and served as commissioner of the Minnesota Housing Finance Agency from 1978 to 1994 – a position he was appointed to five times by three Minnesota governors. From 1994 to 2000, Solem was the regional administrator for the Metropolitan Council, leading the long-range planning for transit, wastewater, parks and community development in the seven-county metropolitan area.  From 2000 – 2006, at the University of Minnesota’s Center for Urban and Regional Affairs (CURA), he led a project to bring new ideas to the issues of affordable housing and regional growth.

Now retired from the Metropolitan Council, Solem is active with consulting and volunteer service. He is chairman of the board of the Community Reinvestment Fund and of the boards of Common Bond Housing Corporation and the Greater Minnesota Housing Fund. Throughout his career, Solem demonstrated an exceptional knowledge of operations and governmental polices, brought a high level of ethical standards to the real estate industry and championed those most in need.

The program is open to the public and the cost is $60. More information is available at http://www.stthomas.edu/centers/shenehon/minnesota-real-estate-hall-of-fame/

To register use the following link:    https://webapp.stthomas.edu/eventregistration/ust/register.jsp?eventcrn=B1973

The Minnesota Real Estate Hall of Fame now has 30 members. Previously named were:

  • 2010: Tony Bernardi, Lloyd Engelsma, Gerald Rauenhorst, William Reiling, Jim Ryan and Sam Thorpe Sr.
  • 2011: Robert Hoffman, Darrel Holt, Bernard Rice, Emma Rovick and five members of the Dayton family: Bruce and the late Douglas, Donald, Kenneth and Wallace.
  • 2012: David Bell, Robert Boblett Sr., Philip Smaby and Boyd Stofer.
  • 2013: Leonard Bisanz, Helen Brooks, Thomas Crowley, M.A. Mortenson Sr. and Kenneth Stensby.
  • 2014: George Karvel Ph.D., Cyril “Cy” Kuefler Sr., Jim Stanton

 

Architecture & Design, Commercial Real Estate, Development, Industry News, International Real Estate, Think Outside The Box, Urban Planning

Rising Towers Escalate Need for Faster Lifts

 The following article by  was reposted from the current issue of Urban Land Magazine

December 1, 2014

Shanghai-tower_800

When Shanghai Tower opens as China’s tallest building next year, the 2,073-foot (632 m) tower will feature elevators capable of traveling 40.3 miles (64.8 km) per hour, or 59 feet (18 m) per second, a new milestone. That bests the 55.1 feet (16.8 m) per second achieved by the elevators in the current record holder, Taipei 101 in Taiwan, which was completed in 2004.

But Shanghai Tower likely will not hold the title as world’s fastest for long. Builders of the Guangzhou CTF Finance Centre, which is scheduled to open in 2016 in Guangzhou, China, have promised elevators capable of traveling 66 feet (20 m) per second, or 45 miles (72 km) per hour. The elevators will take passengers from the first floor to the 95th floor in about 43 seconds.

The question facing the industry today: how fast can elevators go without sacrificing comfort?

“This is a new day,” says Steve Edgett, partner in Edgett Williams Consulting Groups, which works on elevator designs. “We’re in uncharted territory.” Some analysts believe mankind may be close to the limits of elevator speeds using modern technology. “I think there is a limit, not to building, but what we can do efficiently,” says Johannes de Jong, head of technology for Finland-based Kone Elevators.

Kingdom_Tower_360

Saudi Arabia’s Kingdom Tower will feature the longest single elevator ride in a building, about 2,165 feet (660 m). (Kone Corporation)

The biggest obstacle for faster speeds is the variance in air pressure from the bottom to the top of tall buildings. A superfast elevator leaves no time for the body to adjust to the changes in pressure, similar to the effect experienced by divers surfacing too quickly in the ocean.

For elevators to go faster, something will have to be done to accommodate the human ear, which is extremely sensitive to pressure changes. Commercial jets typically take 20 to 30 minutes to descend from their highest altitude and help passengers adjust, yet earaches and complaints are still common. “One thing we cannot do is change the laws of physics,” de Jong says.

For the Guangzhou tower, Japanese tech firm Hitachi, which is building the elevators, will use a sophisticated control panel that can respond to “changes in atmospheric pressure correctly” to smooth the acceleration and deceleration process and “relieve the feeling of fullness in the ear as a result,” a company spokesperson says. This adjustment technology will reduce the abrupt pressure changes inside the elevator car, while special “active guide rollers” will compensate for even tiny lateral vibrations, Hitachi says.

But there is no guarantee the measures will provide a comfortable ride. Every person’s physiology is different; people with colds or earaches may be more susceptible to ear problems. At 66 feet (20 m) per second, even the slightest vibration will create a shock for passengers.

In Taipei 101 and other existing tall buildings, the elevators are usually set to descend much slower than they ascend in order to ease the ride. Nevertheless, passenger complaints are common. “At nine meters [30 feet] a second, I felt my ears pop,” Edgett says.

In the one-kilometer-tall (0.6 mi) Kingdom Tower under construction in Saudi Arabia—which likely will become the next “tallest building in the world”—Kone expects elevator speeds to peak at 33 to 41 feet (10 to 12.5 m) per second. “It’s up to the client,” de Jong says. “We have to show him how it feels.”

However, Kingdom Tower will feature the longest single elevator ride in a building, about 2,165 feet (660 m), using a new carbon fiber cable designed by Kone called UltraRope, which is dramatically lighter and stronger than steel cables.

Read the entire article at http://urbanland.uli.org/planning-design/rising-towers-escalate-need-faster-lifts/?utm_source=uli&utm_medium=eblast&utm_campaign=120114

 

 

Commercial Real Estate, Industry News, Investment Real Estate, Medical Office, Office Real Estate, Real Estate Brokerage, Retail Real Estate

Building Owners Brace for Tall Order: One Way to Measure Space

 Reposted fron a Wall Street Journal article that apperred on May 27th

 By
Ilona Billington

The MetLife building used to be listed at 2.4 million square feet. Now it is listed at 3 million square feet. Getty Images

Coalition Plans to Announce Measurement System in June

One of the biggest complaints of office tenants is that building owners throughout the world use different systems for measuring how many square feet or square meters tenants are leasing, deviating as much as 24% from one another.

Now an international coalition of real-estate organizations formed last year is hoping to change that. The International Property Measurement Standards Coalition in June plans to announce a single measurement system for the global office market.

“The current situation on measuring standards is totally unacceptable,” said Ken Creighton, chair of the coalition’s board of trustees.

But whether or not building owners adopt or ignore the standards remains to be seen. The coalition doesn’t have the clout to require owners to follow its standards and many landlords don’t want to change their current systems, which can mean millions of dollars in extra rent.

For some building owners, adopting a new measurement standard would mean that their building would shrink in size and lose value. “There is a risk that some firms may be sitting on balance sheets that are actually worth significantly less when measured by a common standard,” said Scott McMillan, chief of real estate at the International Monetary Fund.

For many, the debate might seem surprising. After all, landlords throughout the world are governed by the same laws of physics.

But they use widely different systems for measuring space and this affects rents, which typically are charged on a price-per-square-foot or price-per-square-meter basis.

For example, for a space that measures 10,000 square meters (108,000 square feet), some landlords will simply charge rent based on that amount. But most will increase the size by some factor depending on what formula they use for apportioning public space in the building—lobbies, bathrooms, hallways—to tenants.

Landlords also vary in whether they begin their measurement from inside or outside an exterior wall. Some begin measurements at their building’s farthest extremity, like the nose of a gargoyle.

In some cities, including New York, landlords generally have increased loss factors over the years. For example, in 1979, architectural guides listed the Pan Am Building at 2.4 million square feet. Today the tower, which has been renamed the MetLife Building, is listed at 3 million square feet.

Tenants say consistent standards are greatly needed. “I would have preferred this to have happened five years ago, but better now than in five or 10 years’ time,” said Billy Davidson, group property director of Vodafone. VOD.LN 0.00% Vodafone Group PLC U.K.: London GBp209.50 0.00 0.00% May 30, 2014 4:38 pm Volume : 63.70M P/E Ratio 0.01 Market Cap GBp55.39 Billion Dividend Yield 7.13% Rev. per Employee GBp420,129 05/29/14 Vodafone to Meet With Indian O… 05/27/14 FCC Could Use Merger Concessio… 05/22/14 Why is Vodafone Flogging a Net… More quote details and news » VOD.LN in Your Value Your Change Short position “This is the right thing to do.”

The Standards Coalition was formed in 2013 by a group of international property organizations including the Royal Institution of Chartered Surveyors in the U.K., the Building Owners and Managers Association in the U.S. and the International Monetary Fund. The move was partly in response to increasing pressure from large global tenants that are frustrated by the numerous measurement systems.

A group of 18 experts representing 11 countries have been working on the standards. Proposed standards have been circulating for comment among real-estate professionals for months.

Coalition members expect the standards to be controversial. “In any initiative in standardization there will inevitably be winners and losers,” said Marc Mogull, an executive with the investment firm Benson Elliot who also is a member of the Royal Institution of Chartered Surveyors.

There is also the question of implementation. Building owners will have to voluntarily accept the new standards and it isn’t clear how many will do so, especially if it could mean a financial loss.

Many real-estate executives in New York are skeptical that new standards will change the minds of the city’s landlords. “It’s an important enough market that they can make their own rules,” said Mark Weiss, vice chairman of Newmark Grubb Knight Frank.

But tenants could put pressure on building owners to accept standards by avoiding properties that don’t. “I need the confidence from my suppliers to know when they give me comparable details that it’s really comparable,” said Vodafone’s Mr. Davidson. “With [the new standards] I can say that I won’t consider your building unless you show me the measurements based on these standards.”

Some government agencies say they will help pressure owners to accept the standards. One such agency is Dubai’s Land Department, according to Mohamad Al-Dah, a senior director. “From our own point of view we don’t have very fair standards in Dubai, but once the Land department begins using it, we will encourage businesses in Dubai to adopt it,” he said.

Write to Ilona Billington at ilona.billington@wsj.com

 
Commercial Real Estate, Development, Economics, Industry News, Medical Office, Office Real Estate, Real Estate Trends, Uncategorized

Medical Offices Now Work as Timeshares

 The following article was reposted from Globe Street.com

By Carrie Rossenfeld | Orange County
 

Dopp-Grech: “The next step is for independent operators to offer this format without a specific hospital affiliation.”

IRVINE, CA—Like executive suites in the office market, shared medical space to accommodate multiple practices is being explored by medical landlords, Sonya Dopp-Grech, SVP/director of healthcare services for NAI Capital, tells GlobeSt.com exclusively. The concept allows for physician mobility and maximized use of the space.

“The healthcare industry is showing movement toward time-share concepts, allowing physicians to serve different geographical areas without the need to open additional offices,” says Dopp-Grech. “The concept has already been widely used by hospital groups to allow various specialists to reach out into the communities they serve. The next step is for independent operators to offer this format without a specific hospital affiliation.”

Medical landlords are beginning to explore this option with vacant or underperforming space in their buildings. The caveat is finding a responsible and reputable source to manage this type of space, which would look like a regular medical office with a common waiting area, receptionist and exam and treatment rooms. They may also contain a shared lab, equipment and other amenities.

“It’s like Regus does in the general-office market,” says Dopp-Grech. “Doctors go in and out and don’t need private offices so much anymore. They have their laptops and they see patients, but this way they can see patients at all ends of the county and don’t need to find a long-term lease in each location. It makes great sense, since the way of the future is consolidations.”

The concept makes sense for smaller independent practices or those who want to combine with a larger group. From the landlord perspective, if one is faced with vacant space, this presents another way to fill it with medical tenants.

As GlobeSt.com reported in January, consolidation is the keyword for medical practices today as they search for operating efficiencies. Since healthcare is moving away from the hospital setting into more of a retail environment, this consolidation presents challenges for larger medical practices seeking space to accommodate their needs.

One solution has been for larger groups to lease retail space that formerly held sizable stores such as Barnes & Noble, Dopp-Grech told GlobeSt.com. As GlobeSt.com reported earlier, as healthcare moves toward retail settings, many retail landlords are finding themselves for the first time involved in build-outs and tenant improvements for medical practices. While this trend is welcome among most landlords, they may not be prepared for the high cost of some of these improvements, according to Dopp-Grech.

“Consolidation is occurring because health systems want to make everything efficient for the groups,” says Dopp-Grech. “Smaller groups won’t be able to survive with malpractice insurance [and other costs]. So they’re consolidating and going into larger retail buildings, such as a Barnes & Noble that got vacated.”

 Follow this link to Globe Street: http://www.globest.com/
 
 About Our Columnist
Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the West Coast region of GlobeSt.com and Real Estate Forum. She was a trade-magazine and newsletter editor in New York City for 11 years before moving to Southern California in 1997 to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics ranging from intellectual-property licensing and giftware to commercial real estate. She recently edited a book about profiting from distressed real estate in a down market and has ghostwritten a book about starting a home-based business.Email
Commercial Real Estate, Development, Economics, Housing, Housing Trends, Industry News, Multifamily, Real Estate Trends, Residential Real Estate, Uncategorized

Developer Makes a Bet on Prairie-Home Boom

Related Paid $300 Million for Apartments in Texas, North Dakota

 This article was reposted from the Wall Street Journal on March 18, 2014. It was written by Craig Karmin and Eliot Brown

A two-bedroom recreational vehicle at North Dakota Housing’s RV Park in Watford City rents for $2,350 a month.  -North Dakota Housing

Related Cos., the developer best known for luxury condominiums and big commercial projects, is turning its sights to low-slung apartments on the North Dakota and Texas prairie, where a shortage of housing tied to the energy boom is allowing landlords to command some of the highest rents in the country.

The company, run by Miami Dolphins owner Stephen Ross, last week paid around $300 million for 20 apartment complexes with 3,000 units in Midland and Odessa, Texas, according to people familiar with the transaction. It also is in advanced talks for a deal on an existing project in North Dakota’s Bakken region, and plans to raise up to $300 million for a fund focused on shale-rich communities from desert areas near the Mexican border to the Appalachian basin in the East, the people said.

Mr. Ross is following a small band of investors, including private-equity giant KKR & Co. and real-estate firm Westport Capital Partners, into the residential and commercial markets of new and resurgent energy towns a world away from the cities and suburbs where they usually build or buy. They are drawn by rents that would seem more reasonable in Midtown Manhattan and Silicon Valley, the result of almost nonexistent unemployment and low supply.

A two-bedroom apartment in Williston, N.D., for example, can go for $3,000 a month, or more. In nearby Watford City, North Dakota Housing LLC rents a two-bedroom trailer for $2,350 a month. The same rent could fetch a spacious luxury apartment in cities like Las Vegas or Phoenix, or a studio in new towers in New York.

“We think it’s a unique opportunity,” says Justin Metz, managing principal of Related’s fund-management group.

The boomtowns in Texas have been around since oil-drilling rushes of previous decades, but those in North Dakota began sprouting about five years ago as energy companies started to pull oil and natural gas from shale-rock formations through a process known as fracking. Their populations have skyrocketed, overwhelming the existing housing stock. Many workers continue to be housed in barrack-like “man-camps.” While riding a boom is risky, investors point out that they are getting compensated with high yields. For example, Related is expecting the initial annual income from the apartment portfolio it purchased last week will be more than 10% of the purchase price, according to people familiar with the matter.

By comparison, investors on average are getting a yield of about 6% on rental-apartment acquisitions and that figure can dip below 4% in major cities like New York, according to data firm Real Capital Analytics. “Typically, pricing gets ahead of real-estate fundamentals,” says Mr. Metz of Related, referring to high employment and rapid economic growth in the oil and gas-rich regions. “Here you have strong real estate fundamentals and pricing hasn’t caught up with it yet.”

Still, some analysts are warning that job growth eventually will level off and begin to fall after the initial labor-intensive effort of drilling wells is complete. Employment in the rapidly growing petroleum sector of the North Dakota Williston Basin, for instance, is projected to rise from 14,153 in 2009 to more than 53,000 in 2020, before falling to 40,000 by 2030, according to North Dakota State University’s Department of Agribusiness and Applied Economics.

Meanwhile, developers already are adding to supply, causing Moody’s Investors Service last month to issue a report warning that rents in North Dakota boomtowns are “well above sustainable” levels. “It really intrinsically doesn’t make sense for a town with no physical barriers to entry to command the same rents as New York or San Francisco,” says Tad Philipp, director of commercial real-estate research at Moody’s Investors Service.

Not all bets have been winners. For example, Flathead Glacier Group LLC, a Bozeman, Mont., real-estate company, defaulted on a $24 million loan backed by 134 rental apartments in Williston and Watford City just four months after it was sold into a mortgage bond, according to Trepp LLC. Last week, Trepp reported the loan went to 90 days delinquent from 60 days. Inquiries to Flathead were directed to a firm run by loan sponsor John Dunlap, who didn’t respond. But a spokeswoman for Halliburton Co. confirmed that it terminated its lease for 40 units owned by Flathead in August when Halliburton completed construction of housing for its workers in Williston.

Still, many investors and planners believe it could be years more before supply catches up with demand, pushing rents down. For some of the early real-estate investors in the latest boom, cash is pouring in as rents rise. Average rents in Williston have risen from about $1,000 a month in 2009 to nearly $2,500 at the end of 2012, the latest available data, according to the Williston Regional Economic Development Corp.

KKR was one of the first big-name investors to show up, announcing a 164-acre master-planned community in Williston in 2012. The private-equity firm expects to complete this summer eight rental apartment buildings on the site. The apartments have been coming to market gradually and KKR officials say they are leasing 20 to 25 a week. KKR and its partners are spending about $150 million to build the apartments, and to prepare vacant lots that they are selling separately to home builders.

Follow this link to the article: http://online.wsj.com/news/articles/SB10001424052702303287804579447463140236306?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303287804579447463140236306.html&fpid=2,7,121,122,201,401,641,1009

Write to Craig Karmin at craig.karmin@wsj.com and Eliot Brown at eliot.brown@wsj.com

 

Affordable Housing, Architecture & Design, Development, Economics, Home Prices, Housing, Housing Trends, Industry News, Multifamily, Real Estate Trends, Residential Real Estate, Think Outside The Box

Micro Apartments Yield A Big Boom in the Small Space Sector

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The following commentary by Ori Klein was reposted from DSNews. Micro Apartments are becoming more popular in cities where land prices are very high near the most desirable locations.  How long until this trend arrives in Minneapolis / St. Paul? Don’t be supprised to see a development like this before long in the Uptown or downtown Minneapolis submarkets.       -Editor

Ever since the economy took a hit in 2008, downsizing has been a top priority for many homeowners and renters. The McMansion is out; low-maintenance living is in.

You can see it in traditional listings as well as on the real estate auction block—for the past several years, capacious luxury mansions have been sold via auction due to previously languishing on standard real estate listings; this continues to be a popular method of sale for owners looking to liquidate these mammoth estates (just ask Michael Jordan). With finances still in flux for most Americans, cutting back on monthly costs of maintaining a home or apartment is essential. Enter the micro apartment—the latest trend in economical living space.

Being scooped up by young urban singles, service workers, recent grads, and retirees on a fixed income, the micro apartment is the epitome of the downsize. Typically weighing in between 200 and 350 square feet (at most), these units often include private bathrooms and modern building amenities, yet require sharing a kitchen and patio with other micro dwellers. Many consider this a small sacrifice due to the clever space-saving floor plan that offers such furnishings as a dining room table which transforms into a bed, as well as a host of built-in shelves for storage. Bundle that with Internet access and an optimal location near city hot spots and transportation, and micros can be the ideal home for some. Micro apartments have become favored dwellings in leading metropolitan areas such as New York, Boston, San Francisco, and Seattle.

microapt1USA Today recently covered this real estate sector uptick, reporting, “Though tiny has long been typical in Manhattan, mini-apartments are popping up in more U.S. cities where land is finite, downtowns have regained cachet, and rents have risen. In a digital age when library-sized book collections can be kept on a hand-held device, more Americans see downsizing as not only feasible but also economical and eco-friendly. . . . Developers say they can’t build micro-housing fast enough.”

Seattle, in particular, is leading the way with micros, where this style of living is exceptionally popular for young singles who want to reside within city limits. Jim Potter, founder of Footprint Investments and chairperson of Kauri Investments, a real estate investment and development company, has already completed six buildings with 40 to 60 micro apartments each in Seattle and is in the process of developing similar buildings this year in Portland, Oregon, and Jersey City.microapt3

“We don’t do any advertising, and we’re 100 percent occupied all the time,” Potter said. “It is a national phenomenon and Seattle is ahead of the pack. . . . Nobody else is producing something at this moderately priced range. You get a brand new building with a new bathroom. You get Internet access and it’s fully furnished. In general, our buildings are on major bus lines and/or light rail.”

Seattle may be ahead in the micro-space now, but it may not be for long. Despite a blanket 400 square-foot requirement on all apartments in New York City, the Big Apple is also entering the micro arena.

“Last year [Mayor Michael] Bloomberg, along with the Department of Housing Preservation and Development Commissioner, Mathew M. Wambua, launched the adAPT NYC Competition, a pilot program to develop a rental building composed of micro-units,” AOL Real Estate reports. “The winner of the competition proposed 55 units ranging from 250 to 370 square feet (23 to 34 square meters), made of prefab modules. The building is scheduled for completion in Manhattan by September 2015, and will include a rooftop garden, lounges, a deck, laundry, bike storage, a cafe, and fitness room.”

San Francisco and Boston are getting in on the micro action as well, where these “aPodments,” “micro lofts,” or “metro suites,” as they are often called, are being sought after by service workers who want close proximity to their jobs, as well as techies who consider utilizing a micro as a second home for late nights in the city. The economical rent is the greatest draw.

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