Real Estate Management News - 09/21/2016

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September 21, 2016
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LEADERSHIP SPOTLIGHT
Budget Season Has Arrived – Are You Ready?

IREM® HEADLINES
IREM Federal Housing Advisory Board Takes DC By Storm
Becoming a Citizen Lobbyist: Why You Should Do It
Social Media Marketing

INDUSTRY HEADLINES
9 Keys to Building Security
Where Can Investors Find Good Deals on Office Buildings Catering to Tech Tenants?
Orlando's Plan for Building Owners to Report Energy Data Stalls
How to Protect Corporate Building Networks From Cyber Attacks
Shine a Light on Multifamily with the Latest Lighting Trends
Uptown Office Buildings Ditch Dull Lobbies for Bars and Restaurants
Average Apartment Unit Size Decreases by 7 Percent
Building Owners, Developers Ask Industry to Create Healthier Buildings
Majority of Leading Multifamily Firms Open to Home Sharing According to NMHC Survey
Unilever Sells Headquarters Building in Lease-Back Deal
Shopping Centers Look to Entertainment, Recreation to Fill Empty Anchors
Michigan Firm's Innovation Makes Windows More Efficient – Without Replacing Them


 

Leadership Spotlight


Budget Season Has Arrived – Are You Ready?

The 2017 budget season is here. An operating budget is a financial road map for a property, providing critical financial guidance to the real estate manager and the property owner. A well-planned budget allows the manager to anticipate and properly respond to financial changes. The budget helps real estate managers minimize or eliminate surprises for the property owner. But the key word is “accurate.” An inaccurate budget will not prevent surprises – it will create them.

Budgets are just estimates which try to predict the future. Looking at historical data and trends is a way to reduce at least some of the uncertainty of these future predictions. IREM’s 2016 Income/Expense Analysis Reports provide an excellent resource for comparing budget predictions against real data from similar properties within a market. These publications analyze income and operating expenses for every major metropolitan area and many secondary cities in the United States. Analyses are classified by the size, type, and age of the buildings.

A major variance in an expense or income category from one of the publications indicates that the real estate manager should further analyze the reason behind the variance. For example, if real estate taxes average $1 per square foot per year for the city in which the property is located, and the projected tax expense is $1.50, this variance should be analyzed further.

Reports are available for these property types:

• Conventional Apartments
• Office Buildings
• Shopping Centers
• Federally Assisted Apartments
• Condominiums, Cooperatives & PUDS

The IREM 2016 Income/Expense Analysis Reports are available in softcover book, interactive PDF/Excel, Online Labs and Metro Reports.
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IREM Headlines


IREM Federal Housing Advisory Board Takes DC By Storm

On September 14, IREM’s Federal Housing Advisory Board (FHAB) went to Washington D.C. to meet with federal agencies on issues impacting real estate owners and managers of federally assisted properties.

Meeting with Bryan Hooper, Deputy Administrator for Multifamily Housing in the Rural Housing Service of the U.S. Department of Agriculture, the group touched base on several pending projects including the plan to re-amortize properties to retain rural rental assistance, updates that have been made to the Rural Development 3560.2 handbook, and the implementation of the Violence Against Women Act. Members also inquired about the recently published Civil Money Penalties Final Rule.

Meeting with Priya Jayachandran, Deputy Assistant Secretary in the HUD Office of Multifamily Housing, the group covered several topics with Deputy Assistant Secretary Jayachandran; receiving an update on resuming Management and Occupancy Reviews (MORs), suspended since 2011. IREM is also collaborating with HUD to create a “refresher” webinar on MORs, the Project Based Contract Administrators Re-bid process update, and REAC inspections. The FHAB also had the chance to applaud HUD for their work with the Family Self Sufficiency Program. Lastly, a meeting with Amy Ginger, Director of the Office of Housing Voucher Programs at HUD, solidified the new partnership between the IREM FHAB and the Office of Housing Voucher Programs, which started earlier this year.

“It’s nice to know that the preparation for our meetings with the federal agencies pays off, and keeps the pressing and cogent issues in the forefront of our discussions with HUD, PIH and RHS. Our goal is to always deliver timely and meaningful information to our members who manage affordable housing,” states Michael B. Simmons, CPM, President and CEO of Community Realty Management, AMO and Chair of IREM’s FHAB.

For more details on the recent IREM Federal Housing Advisory Board meetings, you can join a one hour webinar on October 6, 2016 from 1:00p.m. - 2:00p.m. (CST). Register Now!
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Becoming a Citizen Lobbyist: Why You Should Do It

Date: Thursday, September 22, 2016
Time: 11:00 a.m. PT, 12:00 p.m. MT, 1:00 p.m. CT, 2:00 p.m. ET
Duration: 60 minutes

Launching in 2017, IREM is excited to present a new program that will help you become an effective citizen lobbyist! Not sure what a citizen lobbyist is, or why you would want to be one? Join us for this 30 minute webinar with Beth Wanless, IREM Government Affairs Staff, to learn about the basics of the new IREM Congressional In-District Program and why it’s critical for you to get involved. The IREM Congressional In-District Program is an easy and effective way to connect with your Member of Congress and get your voice heard and you don’t need to travel to Capitol Hill to do it!

Every IREM Member should plan to attend this brief webinar so they can be IREM’s best advocate. And remember, if you’re not at the table, you’re on the menu.

IREM Members: Get the member coupon code, and use when you register to attend this webinar for free!

Register now!
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Social Media Marketing

Excerpt from Managing and Leasing Commercial Properties, 2nd Ed. (2016)

Social media is the most cost-effective marketing and networking tool available to real estate managers. LinkedIn, Facebook, and Twitter, to name a few, are the top social media methods for allowing companies to reach the public. It's important to stay focused when using social media and to ensure professionalism—but also remembering that everything placed online is there forever. Prospective tenants will review everything that a company or individual has ever published on any form of social media.

Social media is best used in sharing successes and making announcements promoting the properties, as opposed to giving a blatant sales pitch. Craft your marketing effort so that it encourages prospective tenants to communicate. It is important to understand that social media is not a direct advertisement, but a method of direct communication with one’s prospective tenants. The general public want to see a vacant space that is available, read about a job opportunity, or even see the new landscape or common area improvements that were made to a building. This is what is interesting in social media and it is also what gets re-tweeted, liked, shared, or pinned because it provides people with a new, unique opportunity to tell the story and be noticed.

Other ways to have a strong online presence are also through blogs, forums, or even wikis. These platforms allow for information and knowledge sharing and have the potential to reach far larger audiences than traditional forms of marketing.

Order a copy of Managing and Leasing Commercial Properties, 2nd Ed. (2016).
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Industry Headlines


9 Keys to Building Security
Buildings (09/01/16) Fickes, Michael

Effective building security requires nine key techniques, writes Buildings columnist Michael Fickes. One, determine whether it's better to outsource security. Two, if staying in-house, craft a security program that starts with your building's most pressing security needs and move ahead as the budget permits, supplementing trained personnel with technology in areas where these officers need support. Three, identify what the security director's duties and responsibilities are. They typically range from determining how to deploy resources to figuring out which doors will require card access. Four, keep mobility top of mind. Security officers must be able to move around a property, when on patrol and when responding to incidents. Depending on the size and layout of the complex, guards will travel on foot, in vehicles, or on bicycles or Segways. Five, choose from several kinds of turnstiles. Full-height models completely wall off restricted areas with bars, waist-height turnstiles have retracting panels that may provide less security, and newer turnstiles use laser beams instead of hard physical barriers.

Six, craft visitor management rules, policies, and procedures that make sense for your particular address. Seven, take advantage of access control features when managing your building's elevators. Today's elevators can be configured to allow free access to certain floors while restricting access to others. Eight, remind tenants that they are responsible for managing doors within their leased spaces. Where possible, urge tenants to use access control within their suites. Finally, don't neglect parking security. After all, the Bureau of Justice Statistics indicates that 11 percent of property crimes and more than 7 percent of violent attacks occur in parking facilities. Any building with a parking facility should pay very close attention to keeping those spaces safe for all concerned.
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Where Can Investors Find Good Deals on Office Buildings Catering to Tech Tenants?
National Real Estate Investor (09/16/16) Carr, Robert

The popularity of office markets with high concentrations of technology companies has resulted in a conundrum for commercial property investors, as the cost of going in on a sure thing keeps going up and up. Rents have spiked in cities with the most leasing activity by high-tech tenants, with the most in-demand markets such as Menlo Park in San Francisco and the Palo Alto, Calif., sub-market now seeing rents average more than $100 per square foot. That's according to a recent study by real estate services firm JLL. A space of just 5,000 sq. ft. in these markets can cost more than $500,000 a year to lease, researchers note. While developers have rushed to erect dozens of new office buildings in these sizzling markets, there is still no threat of overbuilding, reports Julia Georgules, vice president and director of U.S. office research for JLL.

For those investors who are priced out of the top markets, there are still a number of locales that could produce very attractive yields. The JLL research lists about two dozen such markets that are currently deemed "low cost, higher industry opportunity." They range from Raleigh-Durham, N.C., and Atlanta to Northern Virginia and Chicago. In each, real estate costs and talent are still relatively affordable. They also have the elements in place to foster both start-up and large technology company growth, Georgules notes. Raleigh-Durham, for instance, has recorded steady job growth because of its tech sector connections to the top companies. In Atlanta, meanwhile, Georgia Tech's Technology Square has been a magnet for software developers for some time. Meanwhile, in Chicago, much of the Windy City's rapid office recovery has been attributed to demand from technology and creatives services firms in the River North and Fulton Market areas, a Savills Studley study shows.
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Orlando's Plan for Building Owners to Report Energy Data Stalls
Orlando Sentinel (09/18/16) Weiner, Jeff

After hearing from more than a dozen advocates and opponents of a proposed policy requiring the city's largest buildings to report their energy usage publicly, Orlando's City Council voted late last week to delay taking up the issue until a future meeting. Though Mayor Buddy Dyer recommended that council members move the ordinance forward, he was outnumbered by city commissioners who said it needed more time and work. District 6 Commissioner Sam Ings remarked, "Both sides have some very valid points concerning this, and what we really need to do is really bring it all together." Dyer had argued that the policy had already been scaled back enough, after hundreds of meetings the city held with building owners prior to the Sept. 15 vote. "It's smart and it's green and it's fiscally prudent," he stated.

The measure, which the city dubbed its Building Energy and Water Efficiency Strategy, would require all buildings bigger than 50,000 square feet to report their electrical and water usage each year and receive performance scores. Relatively inefficient buildings would be subject to an energy audit every five years. Over 800 buildings citywide would fall under the proposed program, ranging from Orlando's tallest office towers to large retail stores. Commercial landlords who fail to report their data would face a fine of up to $2,000 per year. The program's ultimate goal is to educate building owners about their usage and the upgrades they could make to achieve greater efficiency. Supporters included the U.S. Green Building Council of Florida and the League of Women Voters. Opponents have included the Building Owners and Managers Association, which argued that publishing the data could cause relatively inefficient buildings to lose tenants or force them to make expensive upgrades that could drive up monthly rents.
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How to Protect Corporate Building Networks From Cyber Attacks
Forbes (09/13/16) Freas, Benjamin

The growing integration of information technology and operational technology in building automation systems is leaving business owners open to malicious attacks from cyber criminals. Cyber attacks on computer networks are a ubiquitous and constant threat, costing victims hundreds of billions of dollars in damages each year. A cyber security breach launched through a building management system or building automation system can compromise the integrity and security of corporate networks that are operating within the building. Building networks were rarely created with security in mind, and the sophistication of hacking is evolving at an incredible pace. Moreover, while IT departments have established protocols, cyber security is a new concept for building systems. Awareness and education of building owners and operators remain a persistent challenge.
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Shine a Light on Multifamily with the Latest Lighting Trends
Property Management Insider (09/12/16) Blackwell, Tim

Innovations in light-emitting diode (LED) lighting are having an effect on apartment community interiors and exteriors. The lighting industry's most sophisticated LED products are nearly 10 times more energy efficient than conventional incandescent lighting. They also last more than 25 times longer, reports the U.S. Department of Energy. Indeed, greater movement to LEDs is casting new light on how apartment property managers can leverage the "latest and greatest styles" to both spruce up existing apartment properties and meet the changing tastes of renters. Lower costs are also factoring in. LED lights emerged as an option to compact fluorescents (CFLs), which got negative reviews from consumers and failed to meet government standards. LEDs, though, were much more expensive. Then, in 2015, two of the biggest light bulb manufacturers -- General Electric and Philips -- rolled out less expensive LEDs to help cost-conscious consumers move away from CFLs.

In recent years, meanwhile, trends are moving away from traditional light fixtures to more modern, industrial, rustic and even vintage styles. The five-bulb chandelier is quickly becoming a thing of the past, replaced by geometric designs and metal finishes. Outdoors, LEDs are emerging as a smarter choice since they burn longer and require far less maintenance. After all, the last thing a property management team wants to do is climb two or three stories with any frequency to replace light bulbs. With lower pricing and greater availability of LED lighting, apartment owners and managers have an opportunity to transition from the traditional and cost-driven standardization from one property to the next. "Different form factors have become more popular than standard three-, four- and five-light fixtures," Clay Brice, a merchant in Home Depot’s lighting division, concluded. "Those fixtures are probably the backbone to most multifamily establishments."
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Uptown Office Buildings Ditch Dull Lobbies for Bars and Restaurants
Charlotte Observer (09/16/16) Portillo, Ely

Some of Uptown Charlotte's most prominent office buildings are in the process of getting major ground-floor makeovers. Out are blank walls, reflective black glass, and bank branches. In are trendy new restaurants and bars that invite pedestrians to come inside. No less than six buildings spread across the city's center are currently undergoing or are slated to undergo ground-floor renovations. Bank of America Plaza, for example, is getting a $20 million upfit that will include ground-floor retail. At 400 South Tryon, Rhino Market & Deli is gearing up to begin construction on its first uptown location. Meanwhile, Charlotte Plaza earlier in September announced a $14 million overhaul to remove much of its black glass and open up the lobby to natural light. "I think the age of the grand office lobby is over -- at least it should be," states David Furman, a longtime Charlotte architect and developer, who noted that such spaces create "vast dead zones as the workers go home. All of these improvements are about that, not to mention turning valuable street frontage into leasable square footage."

Most of the buildings being renovated are from the 1970s and '80s, when office buildings were often set back from the street and deliberately screened from view with dark, reflective glass. Behind the tinted glass and moat-like landscaping, grand lobbies and big bank branches took up much of the ground floor. "Our building, from the ground level, appeared to be closed for business," notes Rhea Greene of Trinity Partners, director of office leasing who handles Bank of America Plaza. "We had space sitting there that was a missed opportunity." Now, tenants are clamoring for restaurants that will keep employees on site come lunchtime or cafes for a quick coffee in the morning. This is tied to financial returns for building owners. For example, an office building with a lunch counter or coffee shop on the ground floor is going to have an easier time asking tenants for higher rents than a building that can only point to a big, ornate lobby.
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Average Apartment Unit Size Decreases by 7 Percent
Multifamily Executive (09/16/16)

More and more apartment developers have been leaning towards smaller units and extra amenities as a means of attracting Generation Y renters who crave a more active lifestyle at their doorstep. Now, there are soem real numbers to support this trend. The latest RCLCO research shows that the average apartment unit size was 917 square feet between 2010 to 2016 -- a 7 percent decrease from 2000 to 2009 when than the average size of apartment units was 988 square feet. Researchers say the trend could be a matter of affordability. As rents have risen nearly twice as fast as wages, more apartment residents can only afford smaller places. The RCLCO study also found that the decrease could simply be most attributable to the increase in studio and one-bedroom apartments becoming available over two- and three-bedroom units -- another shift likely for targeting Millennials.
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Building Owners, Developers Ask Industry to Create Healthier Buildings
Construction Equipment Guide (09/15/16)

According to the new SmartMarket Report by Dodge Data & Analytics, building owners, developers, managers, and investors across the United States are showing increasing interested in creating healthier buildings. The report, titled "The Drive Toward Healthier Buildings 2016," shows that the nation's design and construction industry is poised for wider adoption of building practices that prioritize the physical, mental, and social well-being of tenants and occupants. Researchers also found that that the owners of such buildings are already beginning to see business benefits, such as higher asset values and increased leasing rates. While architects and interior designers are presently leading the industry in the use of such practices, strong owner interest is likely to increase their engagement.

The top five healthier building features in use currently include better lighting and daylighting exposure, products that enhance thermal comfort, spaces that enhance social interaction, enhanced air quality, and products that improve acoustical comfort. Use of almost all of these is expected to grow considerably along with further pioneering approaches such as the use of biophilic design features, spaces that enhance tenants' mood, and opportunities for physical activity. The study concluded that 69 percent of owners that measure employee satisfaction and engagement report improved satisfaction and engagement due to their healthier building investments.
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Majority of Leading Multifamily Firms Open to Home Sharing According to NMHC Survey
Multifamily Executive (09/14/16)

According to a new poll by the National Multifamily Housing Council (NMHC), 43 percent of leaders from the country's biggest apartment firms indicated their residents listed homes on short-term rental sites. The survey follows Airbnb's recent announcement on their multifamily partnership program, which represents the first market-driven effort to turn what is presently a lease violation into a revenue opportunity for both apartment owners and their residents -- so long as the home sharing company can address the concerns held by owners and operators. The survey, conducted from Sept. 7 to Sept. 12, includes responses from 79 firm leaders, covering roughly 33 percent of the NMHC 50 largest apartment owners and managers and more than one million apartment homes. Around 33 percent said they are open to a partnership program similar to what Airbnb announced today, while another 42 percent said they were not interested at all. The rest said they "did not know."

Also according to the survey, the top problems due to residents listing their apartment on home sharing platforms were safety issues (80 percent), liability and insurance (74 percent), and quality of life concerns/neighborhood dynamic (74 percent). Airbnb's multifamily partnership program was first presented at the 2015 NMHC OPTECH Conference. It attempts to alleviate these and other concerns while also offering a revenue share, along with better information and management of the listings.
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Unilever Sells Headquarters Building in Lease-Back Deal
NorthJersey.com (09/15/16) Verdon, Joan

Unilever has sold its Englewood Cliffs, N.J., headquarters to a real estate joint venture for an undisclosed sum, with plans to lease back the complex. OVG Real Estate, a developer in the Netherlands that specializes in high-tech office buildings, and New Jersey-based Normandy Real Estate Partners plan to redevelop and expand the 325,000-square-foot Unilever building. The deal is on track to close by the end of December. Both the land and the building on the 23-acre campus will be leased back to Unilever under an 18-year lease accord. The plan is for the Unilever headquarters to receive a major makeover that will transform it into one of the most intelligent, energy-efficient, and advanced corporate facilities on the East Coast. That makeover is expected to be completed by late 2017. Kees Kruythoff, president of Unilever North America, issued a statement that read: "[The redevelopment] is very much about improving the well-being of our people by providing them a healthy and productive work environment, while also reducing our environmental impact."
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Shopping Centers Look to Entertainment, Recreation to Fill Empty Anchors
Chicago Tribune (09/16/16) Zumbach, Lauren

Chicago-area shopping malls are following a national trend and offering more entertainment and recreation options to fill empty spaces and keep customer foot traffic flowing. Woodfield Mall in suburban Schaumburg, for instance, shoppers can take in a comedy show, let kids burn off energy at an indoor playground, and eat at a Pac-Man-themed restaurant where meals are punctuated by bowling and arcade games. "We want to give shoppers variety," comments General Manager Kurt Webb. "It rounds out our tenant mix and provides an option for people to do more here than they might have done 10 years ago." The nearby Orland Square Mall, meanwhile, is getting an almost 29,000-square-foot Sky Zone trampoline park and 33,600-square-foot Gizmos Fun Factory, a kids' entertainment business with an indoor ropes course, reports CoStar

Of course, malls and movie theaters have been pairing up for years and are continuing to do so. Nationwide, in the last four years, there has been a nearly 6 percent increase in the amount of large shopping center space filled by tenants in the recreation business, mostly coming from cineplexes, observes Suzanne Mulvee, research director and senior real estate strategist at the CoStar Group. Overall shopping center space increased 0.8 percent in that time span, while space filled by apparel stores decreased by nearly 3 percent. More recently, though, owners and operators have been increasingly open to theaters and other entertainment options, especially as more big-box and mall anchor tenants have been closing.
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Michigan Firm's Innovation Makes Windows More Efficient – Without Replacing Them
Midwest Energy News (09/12/16) Balaskovitz, Andy

Mackinac Technology in Grand Rapids, Mich., is on a path to commercialize a new window-covering panel that is designed to boost energy efficiency in buildings. A transparent polymer pane, the window covering -- which feels like durable plastic and bends to the touch -- can be applied to the interior of a window and can be custom fit to any frame, with multi-pane units. The insulation level of a material is given an “R-value” based on how well it holds warm and cold air within a building. Existing windows have an R-value of 1, but a single pane of Mackinac's coating has an R-value of 5 and can go up to 13 based on the number of panes. “We can advance an R-value higher than any other window technology currently on the market,” says John Slagter, president of Mackinac. The product, as touted, can reduce heating and cooling energy loss by 50 percent to 60 percent and can reduce a building's total energy demand by 10 percent. The window covering is geared toward both residential and commercial retrofits, and Mackinac hopes to have a product on the market in about two years.
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