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January 10, 2018
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IREM® HEADLINES
New Tax Law Aligns with IREM Legislative Priorities
Exploring Interpersonal Skills’ Impact on Operational Efficiency
7 Tips to Keeping Cold/Flu Season at Bay

INDUSTRY HEADLINES
Landlords Woo Startups With Built-In Clubs and Office Beers
U.S. Apartment Market Softens as Supply Increases
Getting To Smart Buildings: Six Keys To Implement IoT
5 Best Photography Practices for Marketing Properties in 2018
Sears Is Closing Over 100 More Stores
Goodbye Dark and Dreary, Hello Open, Well-Lit Law Office
Japan to Cut Emissions for Shopping Centers, Supermarkets
L.A.'s New Recycling Program Has More Than 28,000 Complaints for Missed Trash Pickup
How HP’s Boise Campus Implemented Sustainable Landscaping
Manhattan’s Financial Companies Are Driving Office Leasing Again
LEED, WELL, and Fitwel: Navigating Rating Systems
Structural Advances Result in Safer Aluminum Composite Panels


 

IREM Headlines


New Tax Law Aligns with IREM Legislative Priorities

When the Tax Cuts and Jobs Act was signed into law in December, it was the first significant reform of the U.S. tax code since 1986. Although the tax reform legislation was not without its controversies, it lined up favorably with issues for which IREM had long been advocating. In particular:
  • Like-Kind Exchanges: The law retains the current Section 1031 Like-Kind Exchange rules for real property, while repealing the use of Section 1031 for personal property. The exclusion of real estate from the repeal of Section 1031 was a major victory for IREM, which had long fought to preserve this provision.
  • Carried Interest: Carried interest is retained, with the final bill including language requiring a three-year holding period to qualify for current-law (capital gains) treatment. Once again, IREM’s efforts paid off to preserve capital gains treatment for carried interest in the final legislation.
These two issues were addressed as part of IREM’s Congressional In-District Program last year. Acknowledging the active support of IREM members in realizing positive outcomes, Mindy Gronbeck, CPM, of Boise, Idaho, chair of IREM’s Legislative and Public Policy Committee, noted, “We would like to take this opportunity to thank our members for their years of advocacy and steadfast support of our public policy priorities.”

The National Association of Realtors, with which IREM is affiliated, has prepared a summary of what the Tax Cuts and Jobs Act means for homeowners and real estate professionals that can be found here.

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Exploring Interpersonal Skills’ Impact on Operational Efficiency

Real estate asset managers cannot succeed in their roles without the involvement of others. Indeed, interpersonal skills are often as important as financial acumen in enhancing the value of a property. Once properties are acquired and business plans are in place, asset managers often oversee or lead interdisciplinary teams charged with accomplishing strategic goals on the ground.

Join Dustin Read, Ph.D./JD, during an upcoming IREM webinar as he reveals the most recent research findings that explore the roles, responsibilities and requirements of real estate asset managers. This analysis begins with a discussion of the factors influencing the scope of asset managers’ leadership roles before turning to the ways in which these professionals streamline operations in their portfolios. Learn how asset managers collaborate with property managers to make data-driven decisions, exploit economies of scale, and implement sustainability initiatives expected to yield operational efficiencies.

Topics that will be explored include:
  • Coordinating the work of asset management and property management professionals
  • Property assignment decisions and asset manager-property manager relations
  • Practical considerations for real estate investment management firms
  • Recommendations for those who work with, or aspire to be, asset managers
The webinar on “Leadership and Operational Efficiency: The Role of the Real Estate Asset Manager” will take place 2:00-3:00 pm CST on January 24. Go here to learn more and to register.


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7 Tips to Keeping Cold/Flu Season at Bay

The cold and flu season is in full force, but consistent preparation and prevention measures can go far in thwarting cold and flu from settling into your properties and your office. The flu can happen to anyone, but serious flu-related complications can be especially severe for the elderly, those with chronic medical conditions, pregnant women and young children.
Here are seven tips that you, as a real estate manager, can do to help fight the spread of cold and flu at your properties and in your own office:

  1. Provide hand sanitizer and facial tissue in public areas
  2. Promote getting a flu vaccine (host/sponsor a vaccine clinic or partner with local clinics)
  3. Post signage in bathrooms, explaining the importance of hand washing
  4. Educate residents, tenants and employees on easy ways to prevent the spread of cold and flu:
    • Wash hands frequently
    • Cover sneezes and coughs with facial tissue, and throw tissue away immediately. If tissue is not available, sneeze and cough into your arm not your hands
    • Don’t touch your face
    • Eat healthy, including lots of fresh fruits and vegetables
    • De-stress through relaxation and exercise
  5. Improve indoor air quality to ensure proper circulation and ventilation
  6. Keep shared surfaces clean at all times
  7. Install no-touch trash receptacles and door openers in public areas

Also, check out these links for toolkits and more information about what you can do to help prevent the spread of cold and flu.
Find more information at the Centers for Disease Control.
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Industry Headlines


Landlords Woo Startups With Built-In Clubs and Office Beers
Bloomberg (01/05/18) Gopal, Prashant; Levitt, David M.

Stodgy office towers around the United States are getting Millennial-friendly makeovers. Companies in nearly every industry have been scrambling to adjust to Generation Y's tastes and expectations, and commercial real estate is no exception. Such major landlords as Blackstone, Brookfield Property Partners LP, and Boston Properties are spending millions to inject Silicon Valley playfulness into aging towers in major cities. Many find themselves in a de facto "arms race" against newer builds and such co-working businesses as WeWork Cos. "The way towers were built in the 1980s, they were a monument to the corporation," explains Equity Office President and CEO Lisa Picard. "Now, if it feels corporate, that's the kiss of death." Like Google or Facebook, major landlords are finding they can spread the cost of freebies over thousands of employees. In exchange, they can fill gaps in buildings left by companies' shrinking footprints or moving to fresher digs.

Nevertheless, building owners remain under pressure. Since the 2008 economic meltdown, tenants have been saving money by packing more workers into the same space. The average square footage per worker has decreased 9 percent in the last seven years to 181 square feet, reports CoStar Group. Newer buildings make up for the tighter quarters with such things as breakout rooms and open floor plans. "It's a cultural shift in the office market driven by what people in my generation and the generation before think the Millennial generation wants," states 46-year-old Craig Caggiano, executive director of real estate services at Colliers International Group Inc. "The thinking is that Millennials like to take their laptop and work in a coffee bar at the base of the building." The article's author goes on to detail several examples of this trend. For instance, Blackstone's landmark Willis Tower in Chicago now has a cafe and full-service bar for tenants. Boston Properties, meanwhile, is collaborating with WeWork on a ground-up project at the Brooklyn Navy Yard. To be called Dock 72, the 675,000-square-foot building will have rooftop gardens and a food hall.
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U.S. Apartment Market Softens as Supply Increases
Wall Street Journal (01/02/18) Kusisto, Laura

A new RealPage report found the U.S. multifamily housing market's 2017 performance was tepid, with demand failing to keep up with a flood of new apartments. U.S. apartment rents rose 2.5 percent last year, in line with historical averages but down from the 5.2 percent posted in 2015. Meanwhile, rents on new leases fell 0.9 percent in the fourth quarter from the third, partly due to a slower leasing season in the cold winter months. "We don't see any real red flags in the marketplace, but at the same time we shouldn't expect performances at the level that we were seeing" several years ago, says RealPage Chief Economist Greg Willett.

About 400,000 new apartment units came online in 2017, and that pace is likely to be sustained through the middle of 2018. From there, the pace of new construction is expected to decline significantly. Landlords are responding to new construction by asking for smaller hikes than in previous years and raising incentives such as months of free rent. In 2015, more than 12 major metropolitan areas experienced rent increases of more than 6 percent. "For the past few years we've been in this situation where whether or not you made the smartest decisions you were still going to make money," Willett concludes. "Now we're in the situation where you have to be a strong operator."
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Getting To Smart Buildings: Six Keys To Implement IoT
Facility Executive (01/04/18) Haak, Tyler

Building energy management systems (BEMS) emerged during the mid-2000s to help companies and organizations reduce their utility costs and make better strategic decisions regarding energy use. However, the early systems lacked the capabilities to be predictive. Today, reports Navigant Research, the BEMS market is evolving along with the ecosystem of intelligent building technologies such as control systems and wireless technologies. The initial focus of BEMS was indeed energy management. But now companies and organizations want these solutions to optimize everything from sustainability and space utilization to operational efficiency and employee productivity. Consequently, BEMS are beginning to leverage items such as the Internet of Things (IoT) and building information modeling (BIM) to integrate various systems and connect them to a centralized technology "backbone."

There are six important considerations for facility managers to take into account prior to diving into IoT. Number one, test out the use of IoT. Those organizations that want to take more measured steps before revamping their BEMS should begin small. Two, build a solid plan. Figure out what are the specific, measurable goals that your organization wants to accomplish via an IoT-leveraged building management system. Three, be sure to include all of the facility's key stakeholders. Four, take into account technology integration and interoperability. The goal is for a holistic approach to adding systems that comprise the network backbone. Five, don't forget to conduct intelligent building data analysis. To this end, facilities managers and other employees should be trained to analyze the relevant data gleaned in order to make the best decisions. Finally, take appropriate measures where cybersecurity and data privacy are concerned.
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5 Best Photography Practices for Marketing Properties in 2018
Property Management Insider (01/18) Tluchak, Ashley

For those apartment owners and operators looking to upgrade their marketing game in the new year, photographs are a great place to start. Many renters eye an apartment community's website and social media platforms first before they ever set foot on a property. In addition to professional property website photos, real-time photos have become more important than ever. Before you commission a professional photographer or assign staff to take property pics, five best practices should be kept in mind. One, "lighting is your best friend." Owners and managers should always make sure the space is well-lit before photos are taken. For interiors, open nearby blinds/windows to take advantage of natural light. In addition, showcase LED light installments to highlight an energy-saving community. Two, "composition and quality is everything." This means paying attention to the frame and quality of each photo.

Three, "staging is important." Clear the clutter, but be sure not to leave too much bare space. The key is to provide potential apartment residents a realistic idea of how their space will look by incorporating furniture and props. Four, "highlight community details and game-changing amenities." Photos should show what makes your apartment property unique. So, showcase that gourmet coffee bar or updated fitness facility or inviting business center. Finally, "choose wisely when editing." According to the article's author, "increasing the brightness and contrast are good places to start, but don't overdo it. Renters will wonder if you're hiding something."
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Sears Is Closing Over 100 More Stores
CNBC News (01/04/18) Thomas, Lauren

Sears Holdings, parent company of the Sears and Kmart department-store chains, informed its employees on Jan. 4 that it will be permanently shuttering more than 100 additional stores this year. The breakdown consists of 64 Kmart locations and 39 Sears stores, all of which are expected to close between early March and April. "We will continue to close some unprofitable stores as we transform our business model so that our physical store footprint and our digital capabilities match the needs and preferences of our members," the company said in a statement. Sears management states that eligible associates will receive severance.
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Goodbye Dark and Dreary, Hello Open, Well-Lit Law Office
Bisnow (01/01/18) Littman, Julie

Modern law offices have more natural light, smaller individual spaces, and many other things in common with today's tech offices. Designing more open, well-lit offices is in keeping with the legal industry's goal for a shift in demographics, and Cushman & Wakefield Executive Managing Director Sherry Cushman says more than 50 percent of U.S. lawyers will be Millennials by 2025. "For the first time in the history of law, [office design] is a recruiting and retention tool," she notes. Cushman cites as a key shift a move toward more open space and collaborative work environments, with common areas outside the physical office helping to boost business energy.

Millennial associates are working a few hours at home to spend time with family, and then logging in hours at the office, which has firms reconsidering the need for big offices or assigned offices. Cushman says lawyers still want to be in new office towers with glass perimeters, while the new buildings also have more efficient cores and layouts, resulting in paying less per attorney for a better quality office. Cushman officials have been recommending that clients reserve renovation funds each year so when the time comes to consider a build-out, the funding is accessible and associates will not have to choose between end-of-year distribution profits and designing a modern office.
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Japan to Cut Emissions for Shopping Centers, Supermarkets
Nikkei Asian Review (01/04/18)

To promote energy efficiency and fulfill its commitments to reduce greenhouse gas emissions under the Paris climate accord, Japan has pledged to set numerical targets for shopping centers and supermarkets. The country's Ministry of Economy, Trade and Industry plans to prepare a detailed plan by next month and update its notification regarding the country's energy conservation law in April. The goal is to have the new targets go into effect during fiscal 2018. The Japanese government also set targets for convenience stores that use energy equivalent to over 1,500 kiloliters of oil a year and certain department stores in fiscal 2016. The energy conservation initiative will be expanded to cover shopping center operators and supermarket chains whose annual energy consumption is 1,500kl of oil equivalent or more. Of these, only supermarkets with more than 250 square meters of retail space and department stores surpassing 1,500 sq. meters of space will be asked to meet targets that will be determined later.

Small and midsize businesses that would struggle with extra costs will be exempt. Meanwhile, suburban outlet malls are not included either. "The ministry will have, among other powers, the authority to inspect and oversee businesses that have shown little improvement," according to the article's author. Currently, though, Japan's energy conservation laws do not cover such specialty shops as the nation's 14,000-plus drugstores or nearly 2,500 volume electronics retailers. The government will have to decide whether to widen its targets further.
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L.A.'s New Recycling Program Has More Than 28,000 Complaints for Missed Trash Pickup
Los Angeles Times (01/07/18) Zahniser, David

Since July, Los Angeles' commercial-trash customers have filed over 28,000 reports of missed collections -- the latest sign of a turbulent roll-out for L.A.'s new recycling program. Since its debut, Mayor Eric Garcetti has touted the program -- which gives seven companies the exclusive right to pick up trash and recycling at approximately 70,000 businesses, large apartment buildings and condominium complexes -- as a way to boost recycling and take high-polluting trash trucks off the road. However, at the same time, trash bills have skyrocketed for some customers, many of whom are being charged extra when haulers open locked gates or pull bins longer distances to the curb. To date, city inspectors have identified hundreds of inaccurate charges.

The high volume of missed collection complaints has not come as a surprise to build owner Larry Rubenstein, who owns eight apartment complexes citywide. He says every one of his properties has experienced missed collections. "With all the time they took to design this, they were completely unprepared," Rubenstein lamented. "If I did this with my buildings, I wouldn't have any tenants." Beginning Feb. 1, haulers will face financial penalties if they do not address missed collections within the proper time frame. Companies that receive a complaint prior to 2 p.m. must address it by 6 p.m, sanitation officials state. Haulers that are told of a missed collection after 2 p.m. must resolve it by 10 a.m. the following day.
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How HP’s Boise Campus Implemented Sustainable Landscaping
Buildings (01/04/18)

Hewlett-Packard's Boise, Idaho, facility holds the distinction of being the first corporate campus certified with the SITES v2 rating system. By replacing non-indigenous grass with native grass, the technology giant is now saving around 82,900 cubic meters of water annually and has reduced emissions by 90 percent at the sprawling property. Such results have earned the campus Gold certification under the Sustainable SITES Initiative rating system. "At HP, we strive to make life better for everyone everywhere not just through technology, but through sustainability efforts within our operations and supply chain," remarks Cynthia Rock, HP's Head of Corporate Real Estate and Workplace Services. "Through this landscaping project, we're using less water, producing less emissions and increasing bee production -- ultimately protecting our planet for future generations."

With projects such as HP's Boise campus, SITES creates regenerative systems, as well as fosters resiliency and ensures future resource supply. It also mitigates climate change; transforms the market through design, development, and maintenance practices; and enhances human health and well-being. "HP understands that a green environment extends beyond the four walls of a building," concludes Mahesh Ramanujam, president and CEO of USGBC and GBCI. "Through the use of SITES, projects like this are creating ecologically resilient communities, reducing water demand and improving air quality and human health by connecting people to nature."
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Manhattan’s Financial Companies Are Driving Office Leasing Again
National Real Estate Investor (01/05/18)

So-called FIRE companies -- which is broker parlance for finance, insurance, and real estate -- committed to 11.1 million square feet of Manhattan office space during 2017. That's the most in four years, reports Colliers International. Such tenants comprised 34 percent of the total 37 million square feet of deals in what was easily Manhattan's most active leasing year since 2003. That share for FIRE companies would have been typical prior to the 2008 credit meltdown, Colliers analysts note. But more recently, technology and media firms such as Google and Facebook have been driving the market. According to Craig Caggiano, executive director of Colliers' New York tri-state region, today's tenant mix is more diverse than when mega-banks such as Citigroup Inc. and Goldman Sachs Group Inc. were building owners' largest customers. He concluded, "We've seen strong job growth in New York City, and clearly the financial-services companies and the FIRE sector in general is benefiting from that. The question on everybody's minds is whether this job growth is sustainable."
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LEED, WELL, and Fitwel: Navigating Rating Systems
Colorado Real Estate Journal (12/24/17) Bannon-Godfrey, Rachel

Building rating systems are diverging and becoming more specialized. One sign of this shift is the emergence of human health-focused rating systems, of which the International Well Building Institute's WELL Building Standard and the Center for Active Design's Fitwel are among the most common. The latter is a one-time certification, while the former must be recertified in three-year intervals. In addition, WELL concentrates on active workplaces in existing buildings, while Fitwel focuses on a much deeper association between physical and mental health, the design and operation of indoor spaces, and human resources policies.

Credit requirements between LEED and WELL have a certain amount of overlap that grows as the LEED goal increases, driving many LEED Platinum projects to pursue both certifications. It is recommended that a building client initially should focus on specifying their motivation and goals for certification, rather than the criteria of the rating system. A key question concerns the overriding objective of certification, such as whether it will be used for external or internal messaging and recognition, recruitment and retention, or to express core business values. Another key question to answer is the area in which the client is most willing to invest their efforts.
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Structural Advances Result in Safer Aluminum Composite Panels
Construction Global (12/27/17)

Designers increasingly are using aluminum composite material (ACM) panels for architectural applications, giving buildings a modern aesthetic while also being lightweight, dampening sound, requiring minimal maintenance, and using recyclable materials. ACM panels' flexibility makes them a popular option for projects ranging from standard low-rise commercial structures to high-end designs. The honeycomb ACM panel is of particular interest for its weight, rigidity, and fire-resistance properties, and severe weather events also are having an impact on the ACM sector. Panel assemblies now undergo regular assessment to endure high-wind loading, with special emphasis on the negative pressure conditions that pull cladding from a structure with suction. In experiments, hybrid fixation solutions have been delivering outstanding results in terms of facade performance in high winds. Other advantages of adhesives include a faster and less costly assembly process and greater design flexibility.
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