Tag Archive for: apartments

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Commercial property purchases have shown few signs of slowing down after a banner year, according to a recent report from JLL Capital Market’s Miami office.

South Florida commercial real estate transactions rose to $25 billion in 2021. That’s a 183% increase from the $8.8 billion in transactions across Miami-Dade, Broward, and Palm Beach counties recorded the year before.

The momentum has spilled over into this year. In the first three months of 2022, JLL recorded $6 billion in commercial real estate transactions completed across the tri-county area industry-wide, up 51% from the first quarter of 2021. (Data from the first quarter of 2022 is preliminary and subject to change, a JLL spokeswoman told the Business Journal.) This sharp rise in deal activity could be found across the industrial, multifamily, office and retail sectors.

Danny Finkle, senior managing director of JLL’s Miami office, credits the new wave of transactions to Florida’s “business-friendly environment and excellent quality of life.”

“Institutional investors have recognized this cultural shift and are tailoring their investment criteria to target markets like South Florida,” Finkle stated in a recent JLL release.

A significant portion of the property sales centered on multifamily housing. In 2021, there were $14.69 billion in real estate transactions involving residential rentals, an increase of 277% from the previous year. In the first quarter 2022, there have been $2.75 billion in trades involving South Florida apartment buildings, a 76% hike compared to the year-ago quarter.

In the office sector, there were $5.38 billion in trades in 2021, a 235% jump from the year prior. In the first quarter of this year, there have been $1.05 billion in office sales, a year-over-year increase of 10%.

Meanwhile, retail property transactions rose 136% in 2021 year over year to $3.88 billion in South Florida. Then another $1.28 billion of retail transactions took place in the first quarter of this year, a 186% hike compared to the year-ago quarter.

As for industrial, sales volume increased 63% from the previous year to $2.3 billion in 2021. In the first quarter of 2022, a total of $908.29 million in industrial transactions took place, a 76% leap from the year-ago quarter.

Companies and well-off individuals have been migrating to South Florida in greater numbers due to the region’s popularity, weather, and lack of income taxes, brokers and developers have told the Business Journal. It’sa trend that’s expected continue through the rest of 2022, making South Florida a prime spot for investment. Multifamily properties likely saw the biggest increases because rents are surging at a faster rate in the Miami area than almost any other metro in the U.S.

The migration has tipped e-commerce into overdrive, creating a shortage of warehouse and distribution space as companies seek to fulfill the orders of a humming economy amidst a continuing supply-chain crunch.

JLL stated that its Miami office handled 121% more investment sales, debt, and equity transactions in 2021 than the year before. To accommodate that growth, JLL promoted Cody Brais, Kenny Cutler and Max La Cava to director status.

Headquartered in Chicago, JLL has 3,000 capital market specialistsacross 50 nations. The data in JLL’s report was supplied from Real Capital Analytics, a New York-based real estate analysis company that has recorded $40 trillion in commercial real estate transactions since its founding in 2000.

 

Source: SFBJ

 

American dollars grow from the ground

In a surprising twist, suburban office achieved the greatest price growth at 14.8% of all CRE asset classes over the last year, besting investor favorites multifamily and industrial.

John Chang of Marcus & Millichap notes that the price growth in the sector reflects three factors: “a pricing bounce, a disproportionate share of well-leased properties in the sales data, and some investor speculation.”

Unlike the price gains notched in multifamily and industrial, suburban office appreciation is not well supported by rent growth, which was only up by 0.6% or vacancy rate change.

“Part of the gain is an anomaly,” Chang says. “Suburban office prices dipped last year in the early stages of the pandemic, so part of the gains are the property types simply recovering losses. Second, the sales market has been dominated by well-leased properties—high-quality tenants with long-term leases in place. The sales composition is a bit different and there were fewer weaker assets in the deal mix that would normally drag prices down.”

Chang also says investors are taking note of the widely-held belief that to facilitate employees’ return to the office, companies will have to open locations closer to people’s homes.

“A lot of workers, especially millennials relocated to the suburbs because of the pandemic, and a new trend is forming. Investors are positioning ahead of that curve buying low rise suburban buildings,” Chang says. “Investors are betting on history repeating itself. A significant portion of suburban office stock was built in the 80s when baby boomers migrated there. It looks like millennials are in the process of making that same move.”

The second fastest price growth, according to data from Real Capital Analytics, was in apartment properties, which came in at a 14.7% increase. These values are supported by a 90 basis point vacancy reduction through Q2, Chang says.  And again, investors have millennials to thank.

“Investors are pursuing multifamily properties because of demographics,” Chang says. “The aging millennials are now entering their thirties en masse, which is driving household formation up aggressively. Basically, there are so many millennials trying to move out on their own that there are simply not enough housing units to meet the demand. That trend is expected to run five years of longer, supporting the underlying thesis for multifamily investment.”

Industrial came in third, with price gains of 13.6% over the last year. That reflects average rent growth of 5.9% over the last year and a 30 basis point vacancy drop to 5% nationally, as well as cap rate compression of about 20 bps.

“Industrial properties have drawn increased investor attention over the last couple of years as e-commerce thrived during the pandemic,” Chang says. “The supply chain issues of recent months have also brought forth the importance of industrial property as businesses are stockpiling increased inventories to mitigate shipping and delivery risk. Industrial real estate has one of the strongest investment outlooks like investors penciling in aggressive rent gains into their valuation models.”

 

Source: GlobeSt

boynton beach mall

What is going to happen to America’s dead malls? That’s a million-dollar question plaguing retailers and real estate developers.

With a report circulating earlier this month that the biggest U.S. mall owner Simon Property Group has been in talks with Amazon to convert some shuttered Sears and J.C. Penney department stores into fulfillment centers, many industry analysts have been pontificating on the future of malls as logistics hubs.

The consensus seems to be that turning old retail space into new warehouses might not be so easy, even though it might seem like a logical solution. Demand for logistics buildings is skyrocketing as e-commerce sales balloon. But the hurdles include the need to have properties rezoned, which could be met with pushback from local municipalities.

“Just because retail space has gone vacant or remained fallow does not mean that it is automatically a good candidate for repurposing into industrial space,” the head of Moody’s Analytics commercial real estate economics division, Victor Calanog, said in a report just released. “One cannot simply build industrial buildings in areas zoned for commercial use. Often, that requires rezoning areas — a long and tedious process with a low probability of success. State and local governments typically tax industrial properties at anywhere from half to two-thirds the rate of commercial properties, so municipalities have little incentive to rezone areas from commercial to industrial use, as they will collect less tax revenues.”

Demand for various commercial real estate asset types is expected to shift noticeably because of the coronavirus pandemic, with more people now working from home, flocking to the suburbs for space and buying online things they used to browse for in stores.

According to data pulled by Moody’s Analytics REIS, apartment development in the U.S. is expected to be down 15.6% in a post-Covid-19 world. Office development is set to drop 10%, it said, while retail falls 15.7%. Industrial development, meantime, is expected to pick up 3.6%.

The firm did find five markets where it said it would make the most sense to covert vacant retail space into warehouse space, based on where retail has been underperforming and where warehouse demand is hot. Those are: Central New Jersey, Northern New Jersey, Long Island, Memphis and Detroit.

But shopping malls are likely going to be shuttering in suburbs all across the country, as store closures grow in number and landlords capitulate. Another new report out this week from Coresight Research estimates 25% of America’s roughly 1,000 malls will close over the next three to five years, with the pandemic accelerating a demise that was already underway before the new virus emerged.

The malls most at risk of going dark are classified as so-called B-, C- and D-rated malls, meaning they bring in fewer sales per square foot than an A mall. An A++ mall could bring in as much as $1,000 in sales per square foot, for example, while a C+ mall does about $320. There are roughly 380 C- and D-rated malls in the U.S., according to an analysis by the commercial real estate firm Green Street Advisors. It has said malls rated C and below “are not viable retail centers long term.”

CBL & Associates, a Tennessee-based mall owner that has a number of B- and C-rated malls in its portfolio, has said it plans to file for bankruptcy by Oct. 1, highlighting just how much pressure these landlords are facing. Even high-end malls are under pressure, though. No one is really immune. An upscale mall owner in Miami, Bal Harbour Shops, is currently moving to evict the luxury department store chain Saks Fifth Avenue for not paying rent since mid-March. It owes Bal Harbour roughly $1.9 million, according to court documents.

“Despite being given months to honor its past due rental obligations and despite Saks’ impressive post-COVID sales at Bal Harbour Shops, Saks steadfastly refused to make any effort to pay any part of its rent,” Bal Harbour Shops President and Chief Executive Matthew Whitman Lazenby said in a statement. “Bal Harbour Shops has worked tirelessly to ensure our business and our tenants can survive and thrive in this environment. Regrettably, this injudicious behavior has left us with no other option than to terminate the Saks lease and sue to evict Saks from Bal Harbour Shops.”

A representative from Hudson’s Bay-owned Saks was not immediately available to comment.

About 90% of occupants in U.S. malls are either experiential tenants like movie theaters, or department store chains and apparel retailers, according to the Coresight analysis. This makes malls the most vulnerable type of shopping centers to the Covid-19 impact, it said, compared with other properties like strip centers that have grocery stores and outlet centers that offer consumers bargains.

During the pandemic, movie theaters and clothing shops have faced long windows of being closed, while consumers could still flock to strip centers for food, cleaning products and other essentials. In some states, such as New York and California, movie theaters remain closed to this day. And so with minimal revenue coming in, these are the businesses that are most likely requesting rent reductions, or not paying rent at all.

Mall developers had up until now been courting entertainment companies like Dave & Buster’s and iFly indoor skydiving, and restaurants like Cheesecake Factory, to lessen their dependence on shrinking retailers. But those businesses have also not fared well in an age of social distancing.

So, if not warehouses and entertainment complexes, analysts have pondered other potential use cases for so-called dead malls: Churches, medical facilities, office spaces and even apartment complexes.

But even office space is a risky bet now, as the working-from-home trend could become permanent for some. Workers in JPMorgan Chase’s corporate and investment bank, for example, will cycle between days spent at the office and at home, keeping the ability to work remotely on a part-time basis. The world’s biggest Wall Street bank by revenue has said it could shutter backup trading floors located outside New York and London as a result of the move.

The outdoor retailer REI is also looking to sell its recently completed corporate campus in suburban Seattle, shifting instead to more satellite offices, as a result of the pandemic.

“Unfortunately, this whole Covid thing has thrown the experiential pitch out the window,” Moody’s Calanog said in a phone interview. “Until we resolve this pandemic, I suspect we are going to be in a holding pattern with hollow retail space. Then we will see what the most viable format is.”

View the CNBC news video ‘How Shrinking the American Mall Will Impact Local Tax Revenue‘ below.

Source: CNBC

With healthy employment growth continuing, Berkadia predicts this year’s apartment market in South Florida will have the most deliveries in more than two decades.

Their 2019 South Florida Multifamily Market Outlook said construction was scheduled to be complete on nearly 12,000 units by year-end, up more than 18 percent from deliveries in 2018.

“Apartment leasing is expected to remain healthy too as employment growth – particularly in the professional and health sectors – is expected to outperform the national average in 2019,” the report found.

“South Florida’s apartment fundamentals continue to be exceptional thanks to sustained job and population growth combined with a trend away from homeownership,” said Charles Foschini, Senior Managing Director and Berkadia Florida Co-Leader. “There are an increasing number of ’lifestyle renters’ – people who could buy but want to live in a more dynamic, amenity-rich setting. Apartment owner/operators have been very creative in catering to that segment of the market.”

Added Mitch Sinberg, Senior Managing Director and Berkadia Florida Co-Leader, “The market for buying and selling apartment properties also remains healthy, although given where we are at the cycle, we anticipate deal volume to dip slightly in 2019. Interest rates have risen, but we anticipate a tightening of spreads will compensate for any price increase.”

Trends Include 2.1 Percent Employment Growth

Berkadia’s Florida Investment Sales and Mortgage Banking teams collectively completed over $4.5 billion in multifamily and commercial property sales and financings in 2018.

Trends cited by Berkadia:

  • Employment growth of 2.1 percent should drive leasing activity higher than inventory growth.
  • Healthy demand should shift average apartment occupancy up 50 basis points to 95.5 percent by the fourth quarter, which is slightly above the five-year average.
  • Average effective rent is forecast to rise 3.7 percent to $1,606 per month.

 

Source: GlobeSt.

Finally, it seems, we have gotten a handle on Millennials — their desires, their habits and ideas of how to live life.

Now with Millennials a known entity we turn our attention to the next generation: a cohort that has been dubbed Generation Z. Born between the mid-1990s to early 2010, many are just starting to enter the workforce. And they will be just as, if not more, a potent force than Millennials as they make up 25% of the population.

To find how Gen Z will affect commercial real estate — both within as brokers and without, as apartment and office occupiers — we turn to Pushpa Gowda, the Miami-based Global Technology Engagement Director for JLL.

“In 2015, Millennials became the largest generation in the American workforce, according to Pew,” Gowda tells GlobeSt.com.

Little surprise, then, that real estate decision makers are tuned into what millennials are looking for given their significant purchasing power.

“But,”Gowda continues, “they now need to turn towards the next generation and understand importance nuances between these cultural cousins. This generation will be influenced, marketed to, and sold differently than past generations, including real estate, where there is a great opportunity for Gen Z to help shape the future of real estate sales, particularly as Gen Z becomes an increasingly important real estate buyer.”

Here, are seven ways this will happen.

Being Brokers

1. They’ll be very good at online cold calling. “Generation Z is the first to have truly grown up completely immersed in social media from birth – which shapes the way Generation Z makes major purchasing decisions. We’ve seen brokers begin to use social media, other than LinkedIn, to generate leads and new business opportunities.” Generation Z won’t know anything else and will likely be very successful in “online cold calling, Pushpa concludes.

2. Technology will be critical for recruiting and retention. Brokers relying on technology for their business is fairly new, Gowda says. Generation Z will expect the latest technology and will expect it to be seamlessly incorporated into business processes. “This will become critical for recruiting and retention.”

Apartment Dwellers versus Home Buyers

Generation Z outnumbers their Millennials peers by large margins, ultimately positioning them as the force driving the home buying and building market soon, Gowda says.

3. A suburbs revival. As Generation Z is just beginning to come of age, they are slowly entering the housing market, Gowda says. Yet while many are currently renters, they aren’t content staying renters for long, in part due skyrocketing rental prices across the country but more so because they are more family-oriented and will be settling down. They will be raising children. “It may not look the same as their elders’ generation, but they will need housing, and they will want to ease their work-life balance,” she says. For that reason, she adds, “the suburbs are not dead, and even though we’ve seen a lot of shift toward downtowns across the country, don’t count the suburbs out just yet.”

This will force companies to reexamine their headquarters when considering long term moves, she adds.

Office Occupier Trends

Workplace environments have changed dramatically, thanks to Millennials who have reshaped the very concept of work. But Generation Z will spur its own workplace revolution, Gowda says. “These new college graduates are not coming from environments where they sit in one place for hours at a time, as universities have adapted the student experience. This will directly translate to their expectations in the workplace.”

Generation Z is bringing with them an entirely new set of expectations that companies and buildings must strive to achieve in order to remain relevant and competitive to attract this next generation of workers, she says.

4. Less amenities, more flexibility. Generation Z is social, collaborative, and less focused on amenities, requiring flexible spaces that can be adapted to collaborative projects or individual work, Gowda says. In fact, 69% of Generation Z would rather have their own workspace than share it with someone else, while at the same time 74% of Generation Z prefer to communicate face-to-face with colleagues, so both private workspaces (or quiet zones) and collaboration spaces are important. “It will be interesting to see this play out at as Millennials become managers of Generation Z, this will likely be a good match with some differences to accommodate.”

5. Flexible roles too. “Expect Gen Z to be focused on more than just flexible spaces, they want flexibles roles too, Gowda says. Seventy-five percent of Generation Z would be interested in a situation in which they could have multiple roles within one place of employment. “Corporations will need to consider how to physically organize departments throughout the physical office to encourage hybrid roles.”

6. It’s the technology, stupid. “Generation Z is in need of corporate workplaces that support the highly interactive and tech-enabled environments they’ve grown up in,” Gowda says. In fact, 40% of Generation Z said that working Wifi was more important to them than working bathrooms. This is in line with Generation Z expecting not only technology basics but also the latest technology. ”Corporations should make certain to provide a variety of workplace sizes and styles accessible 24/7, as choice and individuality are defining characteristics of Generation Z.”

7. Free-flowing environment. But technology is just one element, Gowda says. “Generation Z demands a free-flowing environment that supports all their needs, from workout rooms, workspaces designed for any given day and spaces that build community and collaboration.”

 

Source: GlobeSt.

Boynton Beach officials will consider plans for the mixed-use Ocean One project along Federal Highway/U.S. 1.

Click on the photo for a SFBJ slideshow of the Ocean One project

Ocean One Boynton LLC, an affiliate of Washington, D.C.-based Washington Real Estate Partners, wants to rezone the 3.63-acre site at 114 N. Federal Highway to allow 358 apartments, 12,075 square feet of commercial/retail, a 120-room hotel and 439 parking spaces. The property runs along the highway from Boynton Beach Boulevard to Ocean Avenue. It is not along the water, but it’s a quick drive across the bridge to the beach.

The City Commission will hold the first vote on Ocean One on March 21 and, should it pass, then a final vote on April 4. Attorney Bonnie Miskel, who represents the developer in the application, couldn’t immediately be reached for comment.

The vote would cover the rezoning and the site plan for the first phase, which would be developed on 1.93 acres of the site. The first phase calls for an 8-story building with 231 apartments in 218,935 square feet and 6,175 square feet of retail, including a health club, and a 7-story parking garage with 359 spaces.

The building would feature a public plaza, an interior courtyard with a pool, summer kitchen, grilling stations and a fountain wall. It would also have a clubhouse. The apartments in the first phase would break down to 152 with one bedroom, and 79 with two bedrooms. Units would range from 560 to 1,600 square feet.

Cohen, Freedman, Encinosa & Associates is the architect of Ocean One. The developer hopes to acquire 0.47 acre of the development site from the Boynton Beach Community Redevelopment Agency. Ocean One Boynton acquired the rest of the site for $9 million in 2005.

According to the Palm Beach Post, Washington Real Estate Partners Chairman F. Davis Camalier is seeking an incentive deal with the CRA to provide millions in property tax rebates for the project.

 

Source: SFBJ