CRE’s Technology Generation Gap

Not surprisingly, what people think about technology seems to depend on when they were born.

Coldwell Banker Commercial surveyed CRE professionals and broke the results down into two groups: those 45 and younger, and those older than 45. In those groups, 65 percent of younger workers think the CRE industry is lagging behind other businesses in its use of technology. Some 68 percent of the older professionals say technology adoption is keeping pace with other industries.

When it comes to ease of use, 80 percent of the younger workers say they’re comfortable with technology, while only 58 percent of older workers say they are. Older workers are more likely to think personal relationship skills are more important than technology.

The survey does find one key area of agreement: 96 percent of all workers say face-to-face meetings are important. Commercial real estate remains a relationship-driven business.

Creating Community-oriented Office Environments

Landlords and tenants have a shared interest in designing office environments that foster collaboration and innovation, with the goal of attracting talented workers and enhancing their job satisfaction, well-being and productivity.

Data Center Leasing Activity Outlook

By: Kelly McBride, Jeff Groh, and Allen Tucker

Increasing demand for cloud-based services is fueling data center leasing activity.

AS ADOPTION of cloud technologies to support the Internet economy and digital content-driven consumption accelerates, demand for third-party data centers that support the cloud-managed service sector is projected to double in the next five years. Globally, the multitenant data centers (MTDC) market is expected to rise at a compound annual growth rate (CAGR) of 12.1 percent between 2015 and 2018. Market absorption for MTDCs, measured in megawatts (MW), is increasing exponentially in many U.S. metro areas, which currently represent 44 percent of the global market.

Today’s data center IT decision makers are using increasingly sophisticated criteria when they shop for space and power. The “big six” data center REITs — Equinix, Digital Realty, DuPont Fabros Technology, CoreSite Realty, CyrusOne and QTS — have continued their development binge, while smaller MTDC players also made some notable acquisitions in 2016.  As the data center market grows, cloud providers want to bring data applications and storage closer to consumers while decreasing latency and increasing reliability, opening new markets for potential data center construction. More flexible buildouts are allowing diverse players to enter a market once dominated by only the largest providers.

Click here to read the full article.

Where New Office Space Costs the Least – and the Most

Real estate giant JLL reports that it will cost an average of $196.49 per square foot to build out an office in 2017. After landlord-provided allowances, that leaves tenants on the hook for more than $150 per square foot. But not all markets are equally expensive.

A new guide uses JLL’s database to determine which markets cost tenants the most and which cost tenants the least, after allowances are figured in. The most expensive include Silicon Valley, Sacramento, Long Island, San Francisco and New York.

The most affordable market is Washington, D.C. “Slightly below average build out costs are offset substantially by large concession packages that are leading the national average,” JLL explains. Next comes Houston; West Palm Beach; Hampton Roads, Virginia; and Atlanta.

“Six of the 10 most affordable markets in the U.S. exist in the South – further proof that affordable labor and materials in the region can greatly affect the occupiers’ bottom line,” JLL notes.

House Ways and Means Committee Hearing on Tax Reform

House Ways and Means Committee Chairman Kevin Brady (R-TX) has scheduled a hearing of the full committee for this Thursday, May 18, intended to show how tax reform will grow the economy by generating investments and creating jobs. The hearing is the first major action the committee has taken since President Donald Trump announced his tax reform plan – a broad statement of overarching goals with little detail.

In announcing the hearing, Chairman Brady said that the committee would hear “from witnesses about specific policy proposals that deliver the most economic growth and how our ideas will directly help hardworking taxpayers and the businesses that create jobs across America.”

The hearing is seen as a first step by House Speaker Paul Ryan and Rep. Brady to revive interest in features of their tax reform plan which have garnered strong opposition among Senate Republicans, including a “border adjustment tax” that would raise the costs of imported goods by 20 percent. Also controversial are provisions of the House plan that would affect commercial real estate, including the elimination of Section 1031 like-kind exchanges, the loss of deductibility of business debt interest, and issues concerning the continued capital gains tax treatment of real estate partnership carried interests.

Uber Hopes Flying Cars Will Take Off

Wired magazine notes: “The kind of aircraft Uber envisions shuttling customers through the air—electric, with vertical takeoff and landing capability, and capable of flying 100 miles in just 40 minutes—don’t exist yet.” But, it adds, the company is already working with real estate companies to provide “vertiports,” and with engineers to deliver the power the cars would need to fly.

One expert says it’s feasible. “I think 2020 is realistic for a vehicle that is not replacing an airplane but replacing a car,” Richard Pat Anderson of Embry-Riddle Aeronautical University, tells Wired.

Shuttered Retail Isn’t Driving Down Rents

Retailers nationwide have closed more than 2,000 stores this year alone. But research by Reis indicates that the wave of closings isn’t yet driving down retail rents.

The Reis database includes properties located in 77 of the 80 primary retail markets. The company has identified 28.9 million square feet of closed stores in the last two years. Reis’ report finds there is “very little evidence suggesting that the closings had a direct impact on retail rents,” and notes that “those with more store closures in general have seen a sharper deceleration in rent growth, but only a few have seen rent declines.”

The report cautions that the “study includes mall and power center closings, yet the rent data used in this study pertains to neighborhood and community shopping centers.” It notes that many smaller shopping centers feature small retail outlets consumers need at the last minute, so that may be shielding those shopping centers from e-commerce competition or the closing of a large store nearby.

Are Suburban Office Parking Ratios on the Rise?

By: Robert T. Dunphy

About a third of the suburban office developers responding to a recent NAIOP survey have already added parking to existing properties; even more expect parking ratios to rise in the future.

HOW MUCH PARKING do suburban office tenants need today, and how much will they need in the future? When “The Suburban Office Parking Conundrum” (Development magazine, fall 2016) explored this issue, expert opinions varied. NAIOP therefore decided to ask members about their recent experiences with suburban parking and likely future trends. From Oct. 6 to 13, 2016, NAIOP conducted two surveys that asked suburban office developers as well as architects and engineers from throughout the U.S. about those experiences.

Focusing on previous trends, nine out of 10 developers who responded indicated that a range of 3.5 to 4.5 parking spaces per 1,000 square feet of office space has been adequate for leasing over the past decade:

  • The most common parking ratio (46 percent) previously used by occupiers was 4.0/1,000.
  • Roughly equal numbers (20 and 24 percent, respectively) reported using less, at 3.5/1,000, or more, at 4.5/1,000.
  • A mere 10 percent of developers indicated that tenants need even less parking, typically 3.0/1,000.

While the 3.5 to 4.5/1,000 ratio has worked in the past, respondents indicated that tenants have been asking for more parking recently.

Nearly 90 percent of developers reported that, within the past 24 months, at least half of all prospective tenants were requesting ratios of more than 4.0/1,000:

  • The most common “ask” (40 percent) was for 5.0/1,000.
  • Twenty-three percent of developers said potential tenants wanted 6.0/1,000.
  • Eight percent said prospective tenants would settle for 5.5/1,000.
  • A small share of developers (3.5 percent) said potential users were looking for even more parking: 6.5/1,000.

Click here to read the full article.

Sentiment Index: Growing Optimism for U.S. Commercial Real Estate Market Over Next 12 Months

NAIOP has released the latest Sentiment Index based on a survey of member developers, owners and investors on whether their 12-month outlook for commercial real estate development is positive, neutral or negative.
The Spring 2016 Index is 0.56. The overall composite Index has increased for the first time in two years. The current survey indicates that there is more optimism in the CRE market than there was six months ago.
View graphs and observations for each of the 10 questions about jobs, the space markets, construction costs and the capital markets.

View the Report

To share your feedback or inquire about participating in the next Sentiment Index survey (Fall 2017), contact

Term of the Week: Omnichannel Retail

The third edition of NAIOP’s Terms and Definitions glossary has been published online, with dozens of terms that weren’t defined in the last version released in 2012. View the definition for ominchannel retail and bookmark the glossary for future use. Read More