Real Estate Management News - 03/22/2017

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March 22, 2017
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IREM® HEADLINES
Who Approves Leases & Capital Improvements? – It Depends
Rocky Mountain Green 2017
IREM Energy Efficiency Survey – Contribute to Industry Research
Reclaim Lost Revenue: 6 Steps to Better Debt Recovery -- Webinar
IREM Grows in Korea as New CPMs Installed
IREM Presence at MIPIM Reinforces International Outreach

INDUSTRY HEADLINES
Shopping Malls Are Tracking Your Every Move
Protecting Apartments From Blizzards and Ice Storms: 4 Tips From The Home Depot
'LinkedIn for High-Rise Office Buildings' Launches in Century City
Apartment Building Developers Face Shortage of Construction Workers
Survey: Consumers Want More Integration Between In-Store, Mobile Capabilities
Nearby Gyms Attract Renters, Buyers
New Life: Transforming Outdated Office Buildings Into Apartment Towers, High-End Retail
Organized Retail Crime on the Rise; Perennial Challenges Remain
Private Snow Removal, a $16.8 Billion Industry
City Strategies to Make Buildings More Energy Efficient
Robotic Security Guards: The Future of Keeping People Safe
Developers Say Retail Deals Getting Tougher in West Michigan


 

IREM Headlines


Who Approves Leases & Capital Improvements? – It Depends

IREM’s research report, Real Estate Asset Management: A Process and A Profession, helps to demystify asset management by summarizing the results of over 90 interviews conducted with real estate practitioners familiar with asset management as both a process and as a profession.

Approving leases and capital improvement projects are two asset management functions closely related to budgeting because they have a direct impact on a property’s cash flow. And while these responsibilities do not fall to asset managers in all real estate companies, it is relatively common for individuals working in this capacity to have authority to autonomously approve leases and capital spends that are included in a budget or within defined dollar limits. Asset managers approach these tasks in different ways across firms. A quantitative approach, oversight approach and deal-making approach were identified in the research.

Asset managers employing a purely quantitative approach tended to have somewhat limited authority to engage in lease negotiations or approve capital investments. They described their role in the process as that of helping transactions teams or senior executives make these decisions through comprehensive financial analysis. Alternatively, those reporting an oversight approach had more autonomy to make leasing and capital investment decisions after turning to leasing agents, property managers and analysts for assistance. The asset manager’s responsibility was described as that of interpreting the analytical work of their team to ensure alterative courses of action were presented for review in concert with educated recommendations before making a final decision. Finally, those reporting a deal-making approach inserted themselves into lease negotiations and capital improvement projects early on and remained involved through completion. Asset managers in this group analyzed and approved these transactions independently for the most part.

To learn more about what companies expect from their asset managers, check out Real Estate Asset Management: A Process and A Profession.
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Rocky Mountain Green 2017

Hosted by USGBC Colorado, the annual Rocky Mountain Green conference unites hundreds of industry leaders, experts and professionals to inspire, connect and advance sustainable building within the region. The 2017 conference, now in its 10th year, will take place April 26-28 at the Sheraton Denver Downtown Hotel in Denver, CO.

Attendees can earn up to 11 GBCI CE Hours and 8 AIA Learning Units at the conference, which will feature an opening reception and keynote, offsite building tours, educational programming, breakout sessions, keynote speakers and exhibitor floor.

Register now!
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IREM Energy Efficiency Survey – Contribute to Industry Research

IREM is currently conducting the second IREM Energy Efficiency Survey to advance industry knowledge on building energy efficiency practices and perceptions.

Take the 2017 IREM Energy Efficiency Survey. Please disregard if you have already completed the survey.

While energy efficiency has made significant gains in the past decade, many companies have yet to realize the cost-saving, NOI-enhancing opportunity in benchmarking, tracking, and managing resource consumption. The IREM survey intends to reveal the reasons for pursuing—or failing to pursue—this opportunity by examining roles and responsibilities related to building energy performance, financial analysis of energy investments, and energy benchmarking and management practices.

All survey participants receive:
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Reclaim Lost Revenue: 6 Steps to Better Debt Recovery -- Webinar

Date/Time: Thursday, April 20, 2017 -- 11:00 a.m. PT, 12:00 p.m. MT, 1:00 p.m. CT, 2:00 p.m. ET
Price: Free

Recovering delinquent tenant debt is a challenge for many property managers. For most, it’s not worth the extra time and money spent tracking debt down, and millions are lost every year as a result.

Don’t let past tenants take advantage of your situation: you can take steps to reduce your property's delinquent tenant debt and increase your odds of successful recovery.

Register now for a 60 minute conversation with Tracy Legg, VP of Business Development for Hunter Warfield, as she explores six essential steps to creating and streamlining your debt collections process. This event is brought to you by… AppFolio, providers of web-based property management software, Hunter Warfield, and the Institute of Real Estate Management.
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IREM Grows in Korea as New CPMs Installed

An expanding property management sector in South Korea bodes well for IREM and its chapter in that country – as evidenced by the installation of 29 new CPM Members during the IREM Korea Chapter’s annual meeting in Seoul last week.

“It was exciting to hear the CPM pledge spoken aloud in Korean by our newest CPM designees,” said Donald Wilkerson, CPM, IREM’s secretary/treasurer, who was in Seoul for event. “It was even more exciting to hear that the demand for professional property management in Korea appears to be growing,” said Wilkerson. “We heard from several real estate practitioners that the Korean market is shifting from one that is primarily development-driven to one that is more management-driven, particularly in the residential sector.”

Also during the annual meeting, Ms. Seon-Hwa Youn, CPM, took office as the 2017-2019 president of the IREM Korea Chapter, taking over from outgoing president Mr. Seung Cheol Noh, CPM, who was instrumental in coordinating the IREM education program that resulted in the installation of the new CPMs.

For more about IREM’s international program, go to http://irem.org/about-irem/international-programs.
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IREM Presence at MIPIM Reinforces International Outreach

IREM leaders were in Cannes, France, last week to participate in MIPIM, recognized as the world’s leading property market and a unique opportunity to connect with IREM members and partner organizations from around the world.

“We are seeing a true globalization of the real estate market,” said Mike Lanning, CPM, IREM President, from Kansas City, MO, “and taking part in MIPIM reinforces that this is the case.” Lanning is also Senior Vice President and Kansas City Market Leader for the Cushman & Wakefield, AMO, itself a global player.

“While at MIPIM, we observed that some countries are very good at developing projects, but not so good at maintaining or increasing the value of the asset,” said Lanning. “That’s where IREM plays a key role – by providing training for property and asset managers not only in the United States, but increasingly beyond our borders.”

While at MIPIM, Lanning participated in a panel discussion on the impact of globalization on ethics. IREM is a founding member of the International Ethics Standards Coalition, which has developed an international ethics standard. “With heightened globalization, the benefits of having a single, universal set of ethics practices for real estate and related professions are clear,” said Lanning. “It will lead to consistency, transparency, and clarity across all sectors of the profession and in all markets.”

MIPIM drew more than 20,000 real estate executives from around the world. IREM was there as part of the USA pavilion, hosted by the National Association of Realtors®, of which IREM is an affiliate. Also attending as IREM representatives were Ben McGrew, CPM, IREM’s President-Elect from Sacramento, CA, and IREM Interim CEO Lynn Disbrow.

For more about IREM’s international program, go to http://irem.org/about-irem/international-programs.
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Industry Headlines


Shopping Malls Are Tracking Your Every Move
Wall Street Journal (03/14/17) Fung, Esther

As more shoppers bring smartphones along with them while they browse in stores, shopping-center owners and operators are tracking their movements and spending habits in order to try and figure out how best to arrange their stores and mall layouts to boost spending activity. Some retail landlords measure how long people stay in the mall, how long they linger in specific stores or in front of certain displays, and where they were before and after heading to the mall. Such information gives them a better idea of which stores benefit the most from being in close proximity to one another. Mall owners are also looking to match shoppers' location data against their social media or e-mail accounts so they can channel personalized ads to them. The moves reflect mall operators' eagerness to stay relevant in the era of increased Internet retail commerce.

The patterns that emerge from the new smartphone monitoring techniques can be highly useful. Some mall customers, for instance, are big spenders who drop more than $20,000 a year during a few trips to a mall. Others may visit 50 times a year but barely spend. Taubman has been engaging various technology vendors to improve its marketing strategy at its mostly high-end malls. One of Taubman's favorite vendors is StepsAway, a cloud-based platform that delivers store discounts and promotions to smartphones that sync with each shopping centers' Wi-Fi network. Shoppers are not required to download an app and are able to view offers either by store or by category. Finally, mobile games are beginning to appeal to retail landlords looking for new and innovative ways to deliver incentives directly to shoppers. Some mall operators install a screen at a corner of the food court and designate that space as an area where customers can compete with each other at games played on their phones, projecting the images on the screen.
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Protecting Apartments From Blizzards and Ice Storms: 4 Tips From The Home Depot
Property Management Insider (03/13/17) Blackwell, Tim

Even with Spring just around the corner, harsh late winter weather continues to wreak havoc on apartment communities in various parts of the country. As a result, property management firms have to be ready to respond. Sub-freezing temperatures, for instance, can still damage water pipes in apartments and common areas if they are not protected. Jeff Watson, regional pro sales manager for Home Depot, offers four tips for protecting multifamily housing properties. One, be sure to wrap exposed pipes before cold weather arrives. "Heat cable, which has to be plugged into an electrical outlet, is best used for exposed indoor pipes because other pipes can be wrapped with inexpensive tubular pipe insulation," the article's author writes. Watson also recommends that all outdoor faucets be checked and remain covered.

Watson's third tip is to cover older water heaters with insulated blankets. Water heaters that are not in use or are warm to the touch are prime candidates for a blanket, Watson urges. Finally, he strongly recommends turning on the heat on in vacant apartments to guard against freezing. In such units, it's also a good idea to allow faucets to drip warm water slowly. "In many cases," he concludes, "the trickle will prevent water in the lines from freezing." It's also not a bad idea to install water leak and freeze detectors near sinks, washers, water heaters, sump pumps and anywhere leaks can occur.
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'LinkedIn for High-Rise Office Buildings' Launches in Century City
Los Angeles Business Journal (03/14/17) Ellingson, Annlee

Hi Rise Network, which bills itself as a LinkedIn of sorts for office buildings, recently launched its first interactive hub in Century City, Calif., with plans to roll out its business communications platform to additional Los Angeles-area high-rises soon. The main idea behind the technology is to help cultivate connections, both professional and personal, between individuals who are already in the same place every day. "Networking has always been a key component in professional success," explains Hi Rise founder and CEO Leslie J. Saleson. "I wanted to extend that to offices in high-rise buildings and found a high-integrity way to connect tenants through a private, active networking platform that allows individuals to connect professionally and personally." The service is free to individuals working in high-rises and offers members exclusive discounts to nearby restaurants and stores.

Users can post company announcements, invitations, corporate charitable functions and other events, as well as meet targeted contacts, connect with others looking to ride share, and help in their job searces. They can also sell and buy items in the marketplace, take part in various hobbies and special-interest clubs, and learn about volunteer opportunities. Hi Rise tested its platform with a beta at the 23-story Watt Plaza office tower in Century City. “We see the platform as the next generation of tenant interactivity," remarks Watt Plaza General Manager Cameron Benson. Later this year, Hi Rise hopes to expand to Chicago and New York.
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Apartment Building Developers Face Shortage of Construction Workers
National Real Estate Investor (03/13/17) Anderson, Bendix

With so many new apartment buildings under construction, developers are concerned that they will have to compete with each other to find construction workers. The construction labor market is already very tight, says Bill McDonald, president and chief investment officer of Mill Creek Residential, a multifamily developer. “It could cause a meaningful ramp up in costs," he adds. The local labor market has shrunk by almost 46 percent since the housing crash, and those workers are not coming back, says V. Jay Hiemenz, president and COO for Alliance Residential. Many workers who were recent immigrants returned to their home countries due to the economic slowdown, while others moved on to other sectors. Scott Wise, executive managing director of development and construction services for Greystar Real Estate Partners, says the shortage is most intense in markets like the San Francisco Bay Area.
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Survey: Consumers Want More Integration Between In-Store, Mobile Capabilities
Retail Dive (03/13/17) O'Shea, Dan

According to a new International Council of Shopping Centers (ICSC) study, consumers are seeking more in-store technology capabilities and deeper, more personalized integration between their brick-and-mortar shopping experiences and their mobile devices and applications. Survey respondents had a number of capabilities on their wish lists that they are hoping retail stores will provide in the near future. For instance, 62 percent said they would like to have access to products/sizes available in-store without having to interact with a salesperson. Another 55 percent said they want to be able to virtually view how home furnishings and accessories fit in their house or condominium before they make a purchase.

In other findings, 54 percent want to be able to create a shopping list on a store app and receive floor maps to help them locate these products when they are in the stores. With regards to personalization, about 43 percent of ICSC poll respondents are receptive to the idea of retailers personalizing prices based on their shopping patterns and even their demographics. Finally, 39 percent said they would visit a mall or shopping center more often if they received alerts from retailers that are selling products they are interested in buying.
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Nearby Gyms Attract Renters, Buyers
Multifamily Executive (03/17/17)

More apartment communities are garnering the attention of would-be residents by touting their close proximity to gyms and workout studios or adding such facilities to their on-site amenities. New home communities are doing the same. A recent Redfin report shows that the percentage of listings in luxury apartment buildings that contained the words "gym," "weight room," or "workout studio" increased to 11 percent in January 2016 versus 7.4 percent six years earlier. In all other apartment buildings and housing developments, the percentage of gyms climbed to 6.7 percent from just 3.9 percent over that same time span. CrossFit has emerged as a major attraction for many. "A lot of the people I know who do CrossFit want to live near the gym because they either work crazy hours or because they are motivated people," states Pennsylvania-based Crossfitter and real-estate agent Lindsey Hatfield.
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New Life: Transforming Outdated Office Buildings Into Apartment Towers, High-End Retail
REJournals.com (03/16/17) Freund, Sara

A flurry of new development activity is hitting Chicago's office property market, with much of it focused on turning outdated Class-C buildings into apartments, retail, hotels, and even student housing. Developers are currently on pace to complete almost 3 million square feet of office space in the Windy City market, surpassing 2016's high of 2.9 million square feet, reports Marcus & Millichap. Tenants who can afford the space and whose images depend on it continue to move into trophy office towers, leaving space for others to upgrade. "All the new product creates shadow space. All of a sudden, owners of buildings that are 12 years old are motivated to find tenants," noted Avison Young tenant representative Mark Robbins. That inevitably puts some vintage office space at the bottom of the proverbial food chain. While they might not be attractive office spaces anymore, they are ideal for apartment, retail, or other conversions.

More so than in years past, developers have a captive audience and are able to push redevelopment of these spaces. To be sure, the conversions are partly fueled by large corporations making moves from the suburbs into the city. John Slivka, who works in the investment properties group at CBRE, observes, "Much of it is related to the younger workforce. They want to be in the city. That's driving demand for these vintage buildings." Several deals that Slivka personally brokered were turned from outdated office space into apartments, hotels, and more. For instance, he was involved with the former Brock & Rankin building that was transformed into the 106-unit Library Lofts apartment building by Marc Realty Residential. The South Loop structure offers tenants a fitness facility, along with an outdoor deck, a club room for entertaining, and a bike room. Another notable property Slivka worked on was the redevelopment of the Oriental Theater building by the Murphy Development Group into a 199-room Cambria suites hotel that is on track to open by the end of this year.
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Organized Retail Crime on the Rise; Perennial Challenges Remain
Security Magazine (03/01/17) Finkel, Ed

Due to an inexplicable rise in organized retail crime across the country in recent years, major retailers are upgrading their technology, policies, procedures and employee training to tackle merchandise loss and violent incidents. The retail sector loses $40 billion to $50 billion in merchandise annually because of robbery, burglary, and shoplifting, according to the Loss Prevention Research Council. To combat loss, the Council recommends organizations implement solutions that convince potential thieves not to attempt a crime. For example, tethering an item or placing it behind a locked case may deter a shoplifter looking for an easy steal.

Retailers can make the crime attempt riskier and the chances of getting caught appear higher by placing alarms and watchful employees in the vicinity. Certain detection solutions can track how many of a particular item is being removed from a shelf. If an unusual number of items are taken at once, a manager is alerted. Some retailers have installed floor pads near high-potential shoplifting areas that will detect if someone is standing in the same spot for a significant period of time. To prevent robberies at their pharmacies, Walgreens has installed time-delayed safes in which to store narcotics that offenders often target. After rolling out the safes in select stores, Walgreens achieved a 90 percent reduction in such crimes.
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Private Snow Removal, a $16.8 Billion Industry
Buildings (03/15/17)

The latest Snow & Ice Management Association (SIMA) study shows that removing snow and ice (S&I) under private contract each year is estimated to be a $16.8 billion industry. According to Martin B. Tirado, executive director of SIMA, approximately 110,000 workers work in the privatized S&I industry. Furthermore, the average operator has been in business 15.4 years and about 33 percent have over two decades of experience. As a whole, the S&I industry has been growing 3.8 percent a year and is on pace to continue growing at 3.2 percent through 2019. However, like many other industries, automation in the form of drones and robots that remove snow is a threat to future growth.
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City Strategies to Make Buildings More Energy Efficient
Citiscope (03/10/17) Hatch, David

Improving the energy efficiency of buildings lacks the glamour of headline-grabbing urban innovations such as drone-based delivery and elevated bicycle highways. Yet for cities determined to achieve sustainable growth, it is a must, considering buildings account for about one-third of all greenhouse gas emissions. Two reports released last month contain recommendations and case studies aimed at helping city leaders craft policies for the buildings sector. The first, titled "Accelerating Building Efficiency - 8 Actions for Urban Leaders," is from the World Resources Institute. It highlights strategies that local governments can employ to maximize efficiency in buildings. The approaches cited in the report that cities can implement include building codes and standards, energy-efficiency targets, financial incentives and partnerships with utilities.

The second report, titled "Urban Efficiency II: Seven Innovative City Programmes for Existing Building Energy Efficiency" from the C40 Cities Climate Leadership Group, is intended to serve as a resource for city leaders and decision makers in designing programs that promote energy efficiency in buildings. Profiles include the Retrofit Chicago Energy Challenge, which supports voluntary energy efficiency steps by commercial, institutional, and private buildings; and Renew Boston Trust, a public-private partnership that directs private investor funds into energy projects in commercial properties.
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Robotic Security Guards: The Future of Keeping People Safe
KXAN (03/13/17) Brandeis, Amanda

Silicon Valley-based company Knightscope was in Austin last week, talking to Texas businesses about their robotic security guards. The K3 and K5 Autonomous Data Machines utilize cameras, sensors, microphones, and GPS technology as they patrol. The robotic guards are already on the job in a number of California shopping malls, sporting venues, and businesses. "Most people are unaware crime has a $1 trillion negative economic impact on the United States every single year," says Knightscope co-founder Stacy Stephens. "We feel like with a combination of the software plus hardware plus humans, we can reduce that by 50 percent."

Each of the four cameras on the robots can scan 300 license plates per minute, for a total of 1,200 plates per minute. If it detects a vehicle that should not be on the property, the client receives an instant notification, and clients can put specific license plates on a blacklist. The robots are also designed to detect anomalies, like someone on the property of a mall after hours. The company began as a direct response to mass shootings. The robots are not meant to replace humans, but rather help them do their jobs better. Stephens, a former law enforcement officer, says the robots have already helped solve and prevent crimes.
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Developers Say Retail Deals Getting Tougher in West Michigan
MLive.com (MI) (03/13/17) Martinez, Shandra

Retail development deals are becoming more difficult to put together in West Michigan, according to Chris Brochert, principal of Lormax Stern Development in Bloomfield Hills, Mich. The rising cost of construction is the biggest problem, and retailers like Bed Bath & Beyond, Nordstrom Rack, and T.J. Maxx have responded by choosing properties already built over new construction. The second biggest problem is retailers' demands for co-tenancy, according to Brochert, who recently discussed the challenges in retail development with developer Scott Wierda, principal at CWD Real Estate Investment, during a commercial real estate conference in Grand Rapids.

"The tenants want a lot," said Wierda. "Tenants want huge tenant improvement allowances to make those deals work and that tends to be our constant battle of balancing that with the economics of trying to make it work." Brochert said his firm is tackling more projects involving smaller, free-standing buildings or smaller multi-tenant buildings, with tenants who are willing to pay the higher costs. Also, Brochert told conference attendees that he does not believe shopping centers are going away because of online shopping, but he acknowledged that they will need to evolve to keep consumers coming back.
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