Four Key CRE Disruptors

Commercial real estate is being redefined by four key trends.

Disruption is a hot button issue for almost every executive today, so it’s no surprise that commercial real estate (CRE) leaders are now paying attention to how it could transform their businesses. The nexus of technological advancements and shifts in consumer behavior is bringing about disruptive change. Given these changes’ potential to redefine land use and fundamentally change the CRE demand-supply dynamic and business model by 2030, CRE executives are paying closer attention to them than ever.

Recent research by the Deloitte Center for Financial Services — as well as the experiences of Deloitte practitioners — reveals four key macro trends that CRE executives should keep top of mind as they begin positioning their companies to be more agile and flexible in the face of disruptive forces. As they look forward into the next 15 years, they should consider the following:

The collaborative economy will reshape demand for and use of CRE. The collaborative or “sharing” economy has moved beyond car-, ride- and home-sharing and is beginning to spill over into CRE. (See “The Future of Shared Office Space,” Development, winter 2015/2016.) This trend brings with it a variety of new challenges and opportunities, including new ways to use excess capacity, more demand for flexible-term leasing and a shift away from an ownership society. As a result, new definitions of commercial space usage and fluid design will emerge, and dynamic revenue models in leasing will surface. As this disruptive growth starts to take hold, CRE leaders should consider rethinking their approaches to designing, developing and redeveloping both new and existing workspaces to meet the “touch-and-go” needs of office users and optimize the value of space.

Technology will disintermediate brokerage and leasing. Direct-to-consumer CRE services that rely on technological advancements in information sharing, cognitive technologies, big data analytics and artificial intelligence are on the rise. Improved access to market information and data will bring buyers and sellers — and lessors and lessees — closer together and increase the potential for transactions without brokers, leading to the disintermediation of traditional brokerage and leasing models. Nonbroker revenue sources and new service models will therefore become critical for businesses in this space. Many companies, for instance, will need to embrace cutting-edge information technology capabilities that drive value for clients in new ways, while others might look to collaborate with more nimble startups.

Click here to read the full article written by Steven Bandolik.

A Step Closer to Solar-powered Zero-energy Buildings

Solar-powered zero-energy buildings are a step closer to becoming reality following the development of a safer, less-expensive thin-film solar panel developed by scientists at Australia’s University of New South Wales. According to The Fifth Estate, an Australia-based business newsletter for the sustainable built environment, “While traditional thin-film solar is made from scarce, expensive and toxic materials, CZTS thin-film technology uses the benign and abundant materials copper, zinc, tin and sulphur — meaning price hikes are less likely as demand increases, and safety is less of a concern.” The durable, flexible and inexpensive CZTS cells can be deposited directly onto a variety of surfaces, and could be integrated into building facades, roof tiles and glazing. The technology’s lack of toxicity may “pique the interest of a construction industry mindful of the legacy of materials like asbestos, and boost the profile of building-integrated photovoltaics, already valued at $1.6 billion globally.”

While the technology’s efficiency, confirmed by the U.S. National Renewable Energy Laboratory, is currently only 7.6 percent, Xiaojing Hao, who led the research, said that the university “is already working with a number of companies keen to use the technology even before it gets its efficiency up to 20 percent,” which researchers expect can be accomplished within a few years.

The Real Estate Crowdfunding Boom

A recent report from researchers at the Cambridge University and University of Chicago business schools found that in the past three years, real estate crowdfunding in the Americas has grown by an annual average of 231 percent, to $483.8 million in 2015. In 2015 alone, it grew by 250 percent, from $138.2 million in 2014. Yet, according to “Breaking New Ground: The Americas Alternative Finance Benchmarking Report,” it remains one of the smallest categories of online alternative financing, accounting for only 1 percent of the total market. The largest category, marketplace/peer-to-peer [P2P] consumer lending, accounted for 71 percent of the total alternative financing volume in the Americas in 2015, generating a whopping $25.7 billion that year.

“The impact of alternative finance is rippling through the financial services industry — and the economies of the Americas,” the report begins. “While capital access via alternative finance platforms remains a small part of the overall markets for debt and equity, online alternative finance addresses demands unmet by traditional sources.” The report is the result of a large-scale, eight-month study that surveyed 257 online alternative finance platforms operating in the Americas, including 178 from the U.S. and Canada.

The report notes that real estate crowdfunding “typically funds asset-backed projects, an asset class that is likely to perform differently [than] equity-based crowdfunding typically used to finance operating companies.” It also notes that in the U.S., “marketplace/P2P real estate lending … accounted for a significant proportion of business volumes, with surveyed platforms attributing $782.01 million towards funds utilized exclusively by business borrowers, mainly in the form of bridging loans or commercial real estate mortgages.”

The Secular Shift in Industrial Real Estate: Complimentary Webinar

E-commerce is disrupting the industrial real estate landscape. Green Street Advisors is hosting a webinar to discuss what’s in store for industrial real estate for the second half of the year, including:

  • Will robust demand for warehouse space continue?
  • How is e-commerce impacting the industrial market and which companies are most active?
  • Which markets will benefit most from e-commerce?
  • Other key insights related to real estate values, obsolescence risk, the Panama Canal and more.

Register for this complimentary webinar, June 2, 2-2:30 p.m. ET, led by Eric Frankel, analyst, Green Street Advisors.

Six Ways US Malls Are Adapting

America’s retail malls are evolving to stay relevant in six ways, according to a recent JLL Real Views article:

  1. Open Air Renovation. Opening up once-enclosed malls has become one of the most popular methods of transforming and refreshing malls, as noted in “Retail Is Going Open-Air.”
  2. Creating Experiences. In a world in which the smartphone is a store, people won’t get off their couches to go to a mall unless it offers them the opportunity to have unique experiences. (For more on this, see the cover story in the upcoming summer 2016 issue of Development magazine.)
  3. Coworking Spaces. This trend, which began in Asia and Europe, has now reached the U.S.; see “Coworking at the Mall”for more.
  4. Pop-up Stores. Shorter-term leases ranging from a single day to a month or more are bringing “smaller companies, established brands and even e-commerce companies” into malls.
  5. Mixed-use Development. Struggling shopping centers are renting out space to nonretail tenants, while successful ones are expanding beyond their retail roots to encompass office, residential, hotel and civic uses. (See “Mall Redevelopment Strategies: Keeping Today’s Malls Competitive.”)
  6. Community Centers. Other malls are “transforming into community centers, creating a ‘main street’ feel to bring local residents together for much more than shopping.”

Mecklenburg County to Update Building Valuation Data Table

As occurs every three years, the Building Valuation Data (BVD) table has been updated and a new table will go into effect July 1, 2016.

The Building Valuation Data table is used in the process of pulling a permit and assessing permit fees. It serves as the guide to help customers estimate the value of the construction for which they are seeking a permit, based on occupancy and construction type.

The Building Valuation Data table is part of the permit fee schedule from LUESA’s fee ordinance, which is listed on meckpermit.com (for the current fiscal year). On July 1, the permit fee schedule will be updated with new data that reflects the new BVD table which is available here.

If you have questions about the pending changes or how to estimate permit fees, please contact the Documents & Inspection staff at 980-314-CODE and select option 2, and then option 2 again.

(Source:  Mecklenburg County Code Enforcement)

2020 Outlook for Industrial CRE

The industrial market has been sizzling hot and the forecast looks bright for the near future due to high demand in primary markets and strong fundamentals according to Kim Hourihan, senior managing director of CBRE Global Investors. Hourihan, a capital markets expert, will lead the “Capital Investment Climate” session at I.CON ’16: Trends and Forecasts.