1403 Weatherly Plaza
Huntsville, Alabama 35803
$450-$575 per month
Retail, Office, or Multipurpose Space
506 Andrew Jackson Way
Huntsville, Alabama 35801
$1,000 per month
The information contained herein was obtained from sources deemed to be reliable; however, Nicole Jones Commercial Real Estate makes no guarantees, warranties or representations as to the completeness or accuracy thereof.
Source:cre.tech By: Janice Lin
Our electric power system requires a constant balance of supply and demand. In the past, we’ve traditionally overbuilt supply to maintain electric system reliability: ensuring that at any given time, there is enough power supply available to accommodate peak annual demand. The net result is that we have trillions of dollars of infrastructure that isn’t used very often, and greenhouse gas emissions from power plants that aren’t run very efficiently.
Energy storage, therefore, is vital to our electric power system. It is a solution to fixing our aging power grid, a critical tool in increasing the spread of renewable energy, and a bridge between the needs of utilities and their customers. Energy storage can be installed at many points in the grid. In fact, there are already tens of thousands of grid-connected storage systems installed at facilities throughout the world. But what is energy storage, and how can it be put to use, today, in facilities across the country?
Grid-connected energy storage is not a new concept. Currently, there are over 1,000 storage systems – equivalent to 150,000 megawatts – installed worldwide. Energy storage can refer to a wide range of technologies and approaches to manage power. There are a number of technologies relevant to commercial and industrial facilities, all of which are able to fit within the established architecture of a building:
- Solid-state batteries: batteries are often paired with an intelligent software system that can charge and discharge them based on a building’s energy usage, weather patterns and historical use patterns.
- Flow batteries: a type of rechargeable battery, where energy is stored directly in the electrolyte solution; benefits typically include a longer cycle life and fast response times.
- Flywheels: these systems store electricity in the form of kinetic energy. If power fluctuates or goes down, the rotor will continue to spin and the kinetic energy that results can be converted into electricity. Flywheels are useful for power quality and reliability.
- Thermal storage: thermal technologies enable temporary energy reserves in the form of heat or cold. Ice storage, for example, works by making ice during off-peak hours when rates are low. When demand increases and rates go up, the ice system turns off the AC and uses the stored ice to provide cooling.
Energy storage can be installed at many points in the grid – including factories and other commercial or industrial facilities. There are already tens of thousands of grid-connected behind-the-meter storage systems installed at commercial, industrial and residential locations throughout the world. These systems are providing a multitude of benefits to facilities, a number of which are especially advantageous to high rises: demand charge reduction, participation in demand response programs, maximized time-of-use rates and emergency backup.
Demand Charge Reduction
Depending on location, many commercial and industrial facilities are subject to demand charges on their energy bills. These charges are based on the 15-minute period in which the demand for energy is highest throughout the day and in some cases, can account for 50% of the total energy bill. While energy efficiency or solar PV can reduce total electricity consumption, these benefits do not always coincide with a building’s peak usage. Energy storage systems, especially those paired with intelligent software, can track a facility’s load and reduce demand charges by dispatching battery power during periods of peak demand, effectively ‘flattening’ the load.
Participation in Demand Response Programs
Demand response for commercial and industrial facilities traditionally involves ratcheting down usage at times of peak demand. Energy storage can enable participation in demand response markets without impacting on-site energy use or operations. By responding to utility price signals, storage systems can increase financial return from participating in DR programs, while also benefiting the grid overall.
Maximizing Time-of-Use Rates
Energy storage systems can shift consumption of electricity from expensive periods of high demand to periods of lower cost electricity during low demand. This reduces the risk of lowering the value of on-site solar if tariff structures change over time, and peak demand periods shift to the evening when the sun isn’t shining. This also allows facilities to make the most of time-of-use pricing and reduce tariff structure change risk to electricity cost.
Planning for emergency backup power is an essential part of a resilience plan. Historically, commercial and industrial facilities have invested significantly in local emergency backup infrastructure. With advanced storage solutions on the market today, there may be opportunities to upgrade this infrastructure to not only provide emergency backup, but also a host of other money-saving and money-making solutions. And by using this infrastructure on a daily basis for demand charge reduction, its reliability and availability in the event of an outage can be increased as compared to a standalone battery and diesel generator that is only during an outage.
Case Study: Glenwood Demand Management Project
Glenwood is one of New York City’s largest owners and builders of luxury rental apartments. The full-service Manhattan real estate organization prides itself in being able to offer residents everything they need to live the “Manhattan lifestyle.” Like most high-rise properties in New York, however, Glenwood is affected by the demand that 13 gigawatts of peaking power places on the city’s grid during the summer air-conditioning season.
To address this problem, Glenwood participates in New York ISO and Con Edison demand response (DR) programs aimed at shedding loads during peak periods. Glenwood has been working with Demand Energy on an energy storage-based solution at a number of its residential properties. The systems are controlled by Demand’s Distributed Energy Network Optimization System (DEN.OS), which maximizes the economic returns of behind-the-meter storage systems, alone or in combination with distributed generation.
In 2012, Glenwood installed a 225 kW/2 MWh storage system with Demand’s DEN.OS software in its Barclay Tower property in downtown Manhattan. One benefit for building owners is the relative compactness and portability of such systems, which can be installed in constrained spaces such as garages and basements. The energy storage system allows Glenwood to switch operating modes from demand capping to DR without a financial penalty, and also helps Con Edison manage a more granular, location-based response to peak electricity demand across different sections of New York.
New York has some of the most expensive demand charges in the world. After the first year of operation, however, Glenwood saw a 14 percent reduction in its cost of energy and power, demonstrating the value and potential for battery-based storage to meet grid challenges throughout the year. The company is now working closely with Demand Energy to install an additional 1 MW/4 MWh of storage systems across ten Glenwood buildings for distributed grid support.
Energy storage is a proven group of technologies that has been in existence for decades. Thanks to tremendous technological progress in recent years, there is now a wide range of affordable and reliable storage options available, and a host of major companies are delivering grid-connected storage to the marketplace.
Source: Realty Biz News Written by Brad Walker
Modern communication networks have effectively shrunk the size of the planet. Information can now travel in seconds rather than the hours, days or even weeks it took data to cross the globe just a couple of generations ago.
This rapid flow of information means that a “bargain” never lasts for long in today’s financial markets. Once a promising investment opportunity has been identified, the money flows that direction until the asset price reaches (or often exceeds) perceived value equilibrium.
When you throw in ultra-low interest rates and sluggish macroeconomic conditions in the US and Europe holding bond yields down and central bank stimuli overheating global equity indices, investors cannot find many low-risk, reasonable-return investments today.
Astute investors understand that the beginning of an interest rate cycle is not the time to be investing in bonds and that that the risk-reward ratio is simply not attractive with stocks at historic highs on the strength of smoke-and-mirrors political promises.
Fortunately, the alternative investment class has grown notably over the last decade or two to include private equity, futures, commodities/precious metals and real estate. Recent surveys also suggest that real estate is the fastest growing category of alternative investment, with sovereign investment funds worldwide projecting an almost 10% increase in real estate investments in their alternatives portfolio over the next five years (from 38% to over 41% of total alternatives portfolio).
Overview of 2017 US Housing Market by Region
Although millions of Millennials have been living with their parents for the last few years, many financial analysts say this trend is winding down. They argue that Millennials and even older Gen-Xers are just now reaching prime home buying ages, and that many of these now not-so-young adults will be moving into their own places over the next few years.
The analysts argue this bodes well for the US housing market, especially as the ongoing economic recovery is also producing more jobs and driving up wages.
Most well-known housing market analysts expect housing prices nationwide to be up by at least 3% in 2017. January clocked in with a 3.3% annual rate increase in existing home prices, so we are on pace to meet that projection. That said, growth will vary dramatically by region and by city, with many second-tier cities leading the way as growth slows down in major markets like San Francisco, LA and Boston.
With notable exceptions like NYC, housing price growth in the Eastern US and the Midwest is expected to lag growth in the other areas of the country listed below.
The Southeastern US has been experiencing solid growth in home values for almost a decade. According to Zillow, Orlando, Florida is one of the hottest cities in the country, and will see home prices increase by an average of 5.7% in 2017. Knoxville and Nashville, Tennessee appear on Zillow’s top ten list with a projected home price growth of 4.4% and 4.3%, respectively.
Utah is a housing hot spot in the Southwest part of the country. Zillow anticipates home prices in both Salt Lake City and Provo will move up by 4.3% in 2017. Denver is also seeing strong demand for housing, with home prices expected to climb by 3.2% this year.
Seattle continues to be an economic powerhouse and a magnet for new residents. Zillow is projecting that home prices in Seattle increase by 5.6% in 2017. Portland is just 170 miles south of Seattle, and Zillow is projecting housing prices move up by 5.2% in 2017 in this dynamic city. Sacramento, the capital of the Golden State, is also experiencing a real estate boom these days, with home prices expected to appreciate by 4.8% this year.
Medium to Long-term Investments Make Sense for Most Baby Boomers
Baby Boomers have different investment needs than earlier generations of retirees.
Up until the Great Recession, demographers and economists projected that most Baby Boomers would retire and move south much like the preceding generation. However, the stock market crash of 2008 decimated the retirement plans of many Baby Boomers as well as savaged their home values.
The net result is that a lot more Baby Boomers are working longer than they or the demographers expected to try and make ends meet. Related to this, an increasing number of boomers are staying in their family homes to remain near their jobs, children and grandkids.
Moreover, those Baby Boomers who are retiring are increasingly opting to stay in their homes rather than downsize. Part of the reason for this is their children (Millennials) have had a hard time finding decent jobs and moving out. Some surveys have suggested that 20% to 33% of the adult children of Baby Boomers are still living at home and one in three is still getting some kind of financial support.
These surveys also suggest that even when their children have moved out, BB parents want to have a big place for their kids and grandkids to come visit. For a large number of BBs, that means deciding to stay in the family home.
Whether you want to call it postponing retirement or reinventing it, it is clear that BBs have a different idea of how to spend their “golden years” than their parents and grandparents did. Given that pensions are disappearing, Social Security payments only cover a fraction of the cost of a middle-class lifestyle in a major city, and interest rates are so low, BBs have to think out of the box to support their “retirement”.
As mentioned above, many older Americans are choosing to stay in the workforce longer, but that’s not possible for everyone, and age does place limitations on the ability to work. Improvements in medical care also mean BBs can expect to live longer, so most can afford to take a longer-term perspective on their investments.
When you put all the pieces of the retirement puzzle together for BBs, a thoughtfully selected portfolio of real estate investments emerges as an ideal solution. No investment is risk free, but BBs who seek steady long-term income and appreciation have many low-risk real estate investment vehicles to choose from today.
Source: creonline.com Written By: Ray Alcorn
Commercial real estate properties are a completely different animal from residential properties in regards to assessing value. That may seem like stating the obvious, but it is easy to overlook the many details that come into play.
For commercial real estate, value is determined in an inverse proportion to the degree of risk inherent to the continuance and stability of the income stream from the property. And of all the commercial property types, perhaps none is more complex in evaluation than a multi-tenant property, either office or retail.
The function of due diligence is to verify, verify, verify.
The exception to that general statement is a true triple-net property. Much of the terminology used for years by commercial real estate professionals has been abused to the point of making what should be easily understood a mish-mash of doublespeak.
Since understanding exactly what kind of property is being considered is of utmost importance in selecting the course of action, it is worth a short digression to clarify this particular term “triple-net.”
A note on triple-net properties
Rarely will you find a true triple-net, multi-tenant property. A true triple-net leased property means the tenant is responsible for all expenses of operating the property, including property taxes; property casualty, and liability insurance; all maintenance including: structural components, mechanical systems, plumbing and drainage systems, glass, and the roof.
Ownership of the property is vested fee simple, inclusive of the entire “bundle of rights” inherent to real estate. In short, the only responsibility of the owner is to designate where the rent check goes. In the case of a multi-tenant property, about the only way to make that happen is to have a master lease for the whole building, and the master lessee then sublets to the individual tenants.
Obviously, an owner focused on maximizing returns and enhancing value is not going to be very keen on the idea of leaving the fate of a property representing a sizeable investment in the hands of a tenant for sub-lease, except in the most unique of situations. Hence, a multi-tenant deal represented as a triple-net investment bears a hard, hard look.
Chances are the property is the subject of a poor definition rather than a triple-net lease. While due diligence for a true triple-net property is somewhat simpler due to the reduced exposure for risk and expense, I’ll focus on the more commonly found properties that are either owner managed or managed by a third party under close contract with an owner.
Due diligence starts in negotiations
Due diligence actually starts in the contract negotiation. Unless the seller understands what you are going to be asking for before the deal is signed, there is going to be automatic trouble in getting to the closing table. I can almost promise you that when the average seller sees my list of required due diligence items, he is going to be overwhelmed.
In fact, I had one seller get so mad that he walked out on the deal right there. Now granted that was an exception, and that fellow did eventually come back to the table. The point is that many of the items I’m absolutely going to insist on examining are of a personal nature, and no seller is going to be comfortable with just turning me loose with his box of documents.
Sometimes I think just having the list is as intimidating as the information that is revealed, and a seller’s reaction can be very revealing as to his general character. Including the list of required due diligence items is a must in the purchase agreement, and you can expect that there will be some negotiation as to what will and won’t make it to the final draft.
When negotiating the contract, be sure to provide ample time (at least 30 days AFTER delivery of all documents) to complete due diligence. Our agreements state that we must give written notice that all due diligence is complete and satisfactory IN OUR SOLE DISCRETION, or we have no further obligation and are entitled to the return of the earnest money deposit.
We generally will not proceed with due diligence until after the contract is executed by all parties. We also keep any time triggers tied to the delivery date of the LAST document, with provisions for the extension of time based on the appearance of any non-disclosed material defects.
By requiring our written acceptance of the due diligence items, we retain control of the deal. We also have a small bit of leverage on the seller as the drop-dead date nears. If I’m really questioning the parameters of the deal, I will often wait until the last hour of the last day before accepting the due diligence, and then only after gaining some concession.
Be careful though, I have also had this blow up in my face when a seller decides they have had enough of my games. There is a fair amount of psychological guesswork, as well as having a feel for personalities involved in deciding just how hard to push a seller.
Leave no stone unturned
As far as how to proceed with due diligence, I have some advice I have paid dearly for over the years. Beyond the physical condition of the building, there are multitudes of intangibles that have to be taken into account when evaluating a commercial property for acquisition. Literally EVERY document concerning the building and its operation MUST be examined.
This includes leases with any and all extensions and modifications, notes and mortgages, whether you are assuming them or not, title policy, certificate of occupancy, insurance policies, ADA compliance, elevator maintenance contracts, tax tickets and history, licenses (in some jurisdictions), parking lot contracts, etc.
Using the list generated in the Purchase Agreement, I go over each item and assign the task for it to some member of the acquisition team, whether it’s the lawyer, surveyor, building inspector, environmental firm or whomever. I make sure they are each contacted, given the timetable for the deal and then follow-up on a very regular basis.
Except for financing, more deals are blown in this stage than any other. It only takes one missing document to completely stall a closing. Each day a closing is stalled, the chances increase for some other element of a deal to come unraveled. Do not skimp on these details. If you’re not going to do them yourself, then make a nuisance of yourself making sure your delegate gets the job done.
Study those leases!
Of the due diligence documents listed for office/retail properties, the most important are the leases, insurance policy, and title policy. The leases are supremely important. I have seen some of the strangest stuff couched in obscure language: First options on purchase, the right to take over adjacent space, tenant ownership of plumbing fixtures (really!), agreements for new carpet every year. You name it, it could be in there.
Very few properties of any considerable age have just one boilerplate lease… over time every owner gets in the position of having to sign a tenant at any cost, and the language of the lease will reflect concessions that one tenant holds out for.
On the flip side, I have found forgotten sources of income, such as a tenant that agreed to pay for the first $250 of HVAC repairs that might go back to the original owner, but was overlooked by subsequent managers.
Read every word of every lease. Make notes of things you don’t understand or need to clarify. Then have someone else read every word of every lease, and take notes. Then compare notes. Then go after the answers. This is so important to me that I don’t dare delegate it to anybody.
I have to understand every element of every lease, or I am buying a stream of income “in the blind.” I want to be able to ask such obscure, penetrating questions of the owner about each one of his tenants that he tells me stuff he didn’t mean to tell me, but figures he better because I’m hot on the trail to find out.
There is also the possibility that my questions will bring back a memory of a tenant fact or a quirk in some system that I wouldn’t otherwise have known. So I ask the questions, and ask, and ask, and ask. This is the only chance I will have to elicit information from the owner with him having an attitude of wanting me to be satisfied.
After we close, he may or may not return a call when I have a problem, but before he gets my money, he’s going to be pretty interested in getting me the information I’m asking for, or a damn good reason why I can’t get it. When I sit down with the owner (or manager) to go over the leases, I also ask for the payment history on each tenant.
If there is a problem tenant, I want to know about it up front. If the problem is chronic, I will discount the cash flow accordingly, which translates to a lower price when value is determined by the NOI.
Similarly, if the owner or manager says they don’t have detailed payment records or bank statements verifying deposits, I have an opportunity to explain why the property just became more risky for me, and how that risk translates into a lower price. Often, the records somehow become available.
A goldmine of information
The insurance policy can be a gold mine of information, especially in the case of a building with some age. Insurance inspectors have seen every trick in the book, and if you can get a copy of the last risk assessment you can be miles ahead of the game. The insured (generally the owner) has to request this, but insist on getting a copy.
Also get a claims history for the property. In many cases you will have to rely on the owner’s memory if he has switched insurance companies frequently. That fact alone isn’t a red flag. Many owners shop insurance regularly because the industry is so competitive and volatile. Some people don’t.
But at the very least, require an affidavit from the owner that says he attests to the truth of the claims represented as being complete to the extent of his knowledge. Courts are littered with suits against “successors in interest” as a way to get an insurance company to settle for the cost of litigation, and very few seller will stand still today for a clause in the contract that states warranties survive closing.
An existing title policy will give you the obvious information regarding easements, rights of way, etc. Be on the lookout for any special exceptions to title. Get a General Warranty deed if you can get it. A savvy seller will offer a Special Warranty deed which will only guarantee title for the period s/he owned the property.
In my home state of Virginia, we go after a General Warranty deed with English Covenants of Title. That goes back to the original land grants from the King of England, and is not often used outside the original 13 states. Other useful information found in title policy can be as seemingly innocuous as who the attorney happened to be that prepared it. It pays to know when a relative is involved!
Physical due diligence items can be handled in a number of ways, and the methods will vary depending on the organization and resources of the buyer, the nature of the property, and the type of financing used. I will not go into inspection as there are experts in the field that would be routinely engaged to satisfy the various engineering and environmental requirements in today’s world.
There is no substitute for thorough due diligence, but it can be a two edged sword. I’ve never seen a property without some hidden defects, though I have often not found them until after we own it.
Some investors are so professional in their due diligence that they routinely make full asking price offers, knowing that they are going to beat the seller down with the due diligence info. There are even professional due diligence firms that are paid partly by a percentage of the savings realized by the buyer.
I’ve been on both sides of this equation, and my experience is that as a seller I can protect myself by knowing what a buyer needs to know before he knows it, and disclosing it up front. That essentially takes the bullets out of the gun. As a buyer, I consider it unethical, as well as a waste of time, to sign a contract with any terms other than what I intend and agree to perform if the property is in fact in the condition represented by the seller.
Quality of the tenants
Commercial properties are particularly vulnerable to sudden economic downturns. A building with a 100% occupancy rate can become 50% overnight with the bankruptcy of a large tenant because that tenant’s business may be dependent on market factors in China, or Russia, or Serbia.
To assess the risk of the likelihood of the continuance of the income stream from a commercial property, you have to gauge the underlying quality of both the tenant base as well as the physical asset, and that’s what due diligence is all about.
Examination of rent rolls, payment histories, and credit files of existing tenants can be very enlightening in quantifying the risk quotient of a particular tenant. But much information can be collected just in the normal course of conversation regarding a tenant’s business. Ask open-ended questions, and seek out any resource available to aid in your decision making.
You’ll rarely have all the answers…
The end result of a thorough due diligence process is that when the time comes to present your deal to either partners, investors, lenders, or another buyer, you will have the level of information and knowledge surrounding the property that very clearly states that you are a professional at what you do.
No one expects anyone to have all the answers. In fact, for many years I was continually frustrated by the repeated experience of going over and over my research into some property, and feel I was completely ready to present it to my father, who founded our development and investment company.
He would listen to my presentation, and invariably somewhere in my monologue he would ask at least one question I did not know the answer to. That used to infuriate me–not make me mad at my father, but with myself for not having anticipated the need for the information.
The experience stayed with me. I have learned that even now, with over twenty years of experience in this business, I rarely, if ever, ask every question that needs asking. I also rarely have all of the answers. So I keep people around me that can look at deals with fresh eyes long after mine are bleary and red, and together we manage to find answers to almost all of the right questions.
And the ones I miss? Well, they get put on the updated due diligence checklist!
Preliminary due diligence checklist:
Comprehensive due diligence: pre-closing
The 9.5-acre estate was once home to Christopher Robin and A.A. Milne
By Erin Blakemore
FEBRUARY 1, 2017
Did you ever dream of exploring the Hundred Acre Wood with Piglet or chilling at Pooh Bear’s adorable house? If so, you’re not alone: A.A. Milne’s Winnie-the-Pooh books are still beloved classics nearly a century after their publication. Now, reports Michael Schaub for the Los Angeles Times, the house where the books were written is for sale.
Cotchford Farm, where Alan Alexander Milne lived with his family and penned Winnie-the-Pooh, The House on Pooh Corner and his other classics, is on the market in England. Featuring a renovated country house and 9.5 acres of property, the East Sussex estate is classically English—and even more so because of who once owned it.
Savills, the real estate firm selling the property, says that the house has six bedrooms and four reception rooms. It was originally built in the mid-16th century. As Schaub notes, the home played host to evacuated families during World War II, and it was later owned by Rolling Stones guitarist Brian Jones who died there in 1969.
The estate includes an apple orchard, a summer house, a swimming pool, landscaped gardens and even a statue of Christopher Robin. That’s fitting as the real Christopher Robin, Christopher Robin Milne, once resided in the home, and his stuffed animals served as fodder for his father’s stories in the years after World War I.
Perhaps most intriguing is the house’s proximity to what Milne characterized as the “Hundred Acre Wood.” In real life, the fabled forest was based on Ashdown Forest, a one-time medieval deer hunting forest that is now protected land. The forest now promotes self-guided “Pooh Walks” for visitors that include jaunts to the “Pooh Sticks Bridge” where Winnie and Piglet threw sticks into the water. That bridge, where the real-life Christopher and his nanny played the game, is in close proximity to the property for sale.
Milne, who had built his literary career on plays and detective stories, soon found himself writing almost exclusively for children after what began as a short poem published in the magazine Punch soon became a phenomenon. It’s a legacy that he felt overshadowed his more important work, and his son, too, was hounded by his father’s bear for the rest of his life. As the real-life inspiration for Winnie-the-Pooh, he was forced to participate in its publicity and was harassed by people who couldn’t separate literature from reality.
Fame came at a price for the Milnes. And the home’s eventual buyer will pay a price, too: The asking price is $2.38 million. But for anyone who still dreams of heffalumps, woozles, Eeyore’s gloomy place or a pot of delicious honey, living in Milne’s magical abode might just be worth the whole honey pot.
Read more: http://www.smithsonianmag.com/smart-news/house-where-winnie-pooh-was-written-sale-180961999/#hZEETGI6QhIlMOYv.99
Source: National Real Estate Investor By: Dan Wagner
Due to rapid growth, the Southeast is emerging as an economic powerhouse with a diversifying base.
With two international gateway markets in Atlanta and Miami—together accounting for more than 50 percent of the region’s international commercial real estate investment—and strong growth and educated workforces in smaller cities such as Charlotte, Tampa and Nashville, the Southeast region would form the sixth largest country in the world with a growth rate that would exceed any in the top five.
The Southeast boasts an industrial expansion fueled by both import and export activity, as well as increases in manufacturing employment and activity. Overall industrial vacancy is at a record low for the region. Atlanta, Orlando and Memphis provide strategic locations for e-commerce users, and Memphis has seen an excessive amount of distribution activity relative to the market’s size. The region benefits from port markets such as Savannah, Miami and Charleston as well, and industrial health will continue to strengthen with the widening of the Panama Canal.
The increase in population and employment growth, coupled with strong market conditions, could prompt an office construction boom throughout the region. Nashville in particular has accounted for one third of all office space constructed in the Southeast over the last two years, with 3.5 million more sq. ft. projected over the next two years. Additional construction in Nashville and throughout the Southeast could mitigate the leverage currently held by landlords, who have been able to lift rates consistently. In 2016, every market in the Southeast hit record highs for office asking rent, which rose by more than 10 percent, though the region still provides a great value compared to other U.S. regions.
Retail has followed the trend, with vacancies hovering near historic lows and asking rents near historic highs. Despite the increase in e-commerce, retail development is expected to continue, though it will be at a more conservative pace than pre-recession levels of construction. Markets with the largest amount of new retail development expected are Atlanta, Orlando and Tampa.
Atlanta and Orlando, along with Miami, are also poised for the most hotel development in the Southeast. With six consecutive years of U.S. economic growth, leisure and business travel have increased, stabilizing hotel performance. The revamp of leisure travel in Florida and along the coastal markets and business travel in Atlanta, Charlotte, Nashville, Miami and Orlando has increased the hotel demand.
Multifamily supply has caught up to the population surge in the Southeast, with deliveries outpacing absorption in 2016 for the first time since the recession. However, with 48 percent of the country’s net migration flocking to the Southeast, there is still a high amount of activity and interest in urban multifamily assets.
CBRE’s 2017 Southeast U.S. Real Estate Market Outlook touches on each city’s strengths in more detail.
Dan Wagner serves as Southeast research director for CBRE.
As I mentioned in an earlier post, there are lots of terms used by commercial real estate investors that often confuse or intimidate novice investors. I promised to define some of these terms in occasional blog posts. Well today is your lucky day, because I decided to define four related terms: Core, Core Plus, Value Add, and Opportunistic. These are the four investment strategies, and most commercial real estate investors will focus one or two of these strategies when investing.
Core:These are fully stabilized properties with credit quality tenants on long term leases. These investments are well located in primary and secondary markets. Usually these properties are purchased by institutional investors that are looking for a a safe reliable return. Core investments in commercial real estate are often purchased as a way to diversify an investment portfolio.
Core Plus: Investors who generally want a safe return, but are looking for a little bit of upside prefer Core Plus. These properties are match the physical description of Core investments, but usually have some opportunity to increase NOI. A common Core Plus investment would be a class A office building in a CBD in a primary market. The property would have good tenants, but might have a lot of upcoming lease roll. Core investors would see this lease roll as a threat to their reliable income, but Core Plus investors might see this as an opportunity to increase rents.
Value Add:This strategy is exactly what it sounds like. Value Add investors are looking for the opportunity to increase the value of their commercial real estate investments. Often these properties will have a high vacancy rate or some physical obsolescence. Value Add investors will buy these properties at a discount, and work to increase the occupancy or fix the physical deficiencies. Once the property has been stabilized, these properties may be sold to Core investors.
Opportunistic: There are a lot of different types of investments that fall into this category, from ground up development, to adaptive re-use, to emerging markets. The unifying principle is that the investor is willing to take entrepreneurial risk to achieve out-sized returns.
These are not strict definitions, just broad guidlines. When I’m helping investors in Reading, PA, I always like to start off by asking which investment strategy they prefer. Feel free to comment below and let me know which investment strategy you prefer.
Source: madeinalabama.com By:Dawn Azok
TUSCALOOSA, Alabama – Twenty years ago today, the first customer-ready M-Class SUVs began rolling off the Mercedes-Benz auto assembly line in Tuscaloosa County, launching new eras for both the automaker and the state of Alabama.
For Mercedes, the M-Class was the first mass market SUV, and its success helped spin off a full range of similar models for the premium German automaker while also influencing the offerings from competitors.
For Alabama, the start of M-Class production was also the start of the modern auto industry. Minivans, sedans, pickups and more SUVs have followed, as Honda, Hyundai, Toyota and hundreds of suppliers set up shop in the state.
“In the 20 years since Mercedes began producing vehicles in Alabama, our partnership with the company has grown stronger today than ever before,” Governor Robert Bentley said.
Source: Businessalabama.com Written by Nancy Mann Jackson
A flare for growing biotech companies is a characteristic of the genomic researchers of the HudsonAlpha Institute. The co-founder and one of his first associate entrepreneurs are good examples.
Nurtured in his science and business by HudsonAlpha Institute’s founder Jim Hudson, Jian Han has followed Hudson’s footsteps as a serial entrepreneur of biotech firms.
When the HudsonAlpha Institute for Biotechnology opened in Huntsville in 2009, it promised to boost genomic research, economic development and educational outreach.
The institute has delivered on all three counts, bringing together some of the world’s leading thinkers in genomics with innovative entrepreneurs and educators. Together, they are working to improve human health and quality of life by participating in ongoing genetics research and developing products, services and companies that make that research accessible and available to improve people’s lives.
HudsonAlpha’s campus spans 150 acres and now includes three buildings housing 27 growing companies and approximately 300 employees in the companies and the nonprofit research center. While the institute’s success relies on strong research and viable products and services, the most important ingredients are passionate entrepreneurs who have a vision and dedication to see it through. With a number of successful startups under its belt, HudsonAlpha has become a breeding ground for visionaries who often start not just one company but many companies in succession. Here’s a look at two of those prolific business-makers and what keeps them going.
Born and raised in Huntsville, Jim Hudson was the son of an entrepreneur. His father was his partner in Hudson’s first businesses, which were an iron and aluminum foundry and an antenna company. But Hudson’s first love was science, and after selling those businesses in 1981, he returned to school to pursue a master’s degree in molecular biology.
“While I was a scientist first, I was always looking for business opportunities that tied in with my research,” he says. Eventually, he founded Research Genetics, a Huntsville company that produced arrays of artificial DNA for use in genetics research. As the company grew, Hudson began working toward incubating other biotechnology companies. He would encourage his employees to launch their own businesses and in return for being a co-founder of those companies, he provided office space, supplies and business services at no cost.
When Hudson sold Research Genetics in 2000, it had grown to 260 employees and $28 million in revenue. When the new owner relocated Research Genetics to California in 2002, many of those employees were laid off.
After spending so much time and effort to build a strong community of biotechnology professionals in the Huntsville area, Hudson didn’t want to watch it fall apart. He formed the Partnership for Biotechnology Research to “keep the community together,” bringing in speakers from all over the world for quarterly meetings.
As a founder of HudsonAlpha Institute for Biotechnology, Hudson continues to invest in new companies and serve as a mentor and supporter of other companies based on genomics research. “I’m a scientist by nature, but I have a desire to take my education and use it in business,” Hudson says. “I continue to believe that biotechnology is second only to electronics in its potential to improve life for all of us.”
HudsonAlpha’s unique combination of nonprofit research and commercial businesses makes it an ideal place for biotech entrepreneurs, and past success seems to be building a generation of serial business owners.
“When you experience success and make enough money so that you’re no longer worried about your own financial picture, then you want to start more companies to make a difference in the world,” Hudson says.
“We believe capitalism is the best way to bring our research to make a difference for the most people. Here, we have a truly dynamic, supportive environment. We meet together every week and share ideas and root for each other.”
Growing up in China, Jian Han was the son of a leading Chinese physician and researcher. His father introduced many new technologies in China surrounding infertility treatments and genetics testing. For instance, he invented
chorionic villus sampling (CVS), a prenatal genetics screening procedure.
Because of his father’s passion, Han decided to come to the United States to study medicine. After his father’s death, while Han was a student at the UAB School of Medicine in Birmingham, he felt driven to launch a company to bring the work of his father’s lifetime to the marketplace.
While still at UAB in 1996, Han launched Genaco, which commercialized the technology his father developed and earned Chinese FDA approval. As the business grew, it drew the attention of Hudson, who owned Research Genetics at the time. “He asked me to come to Huntsville and offered free space, free Internet access and other perks,” Han says. “You can’t get much better than free.”
Han relocated Genaco to Huntsville and, in 2006, sold the business to Kiagen, a German company. By then, he was hooked on Huntsville and on biotech entrepreneurship. In 2007, Han launched iCubate Inc., a molecular diagnostic company, to market his proprietary technology that allows users to rapidly detect multiple pathogens in one test. Two years later, he launched iRepertoire, which commercializes applications of arm-PCR technology, which Han developed for infectious disease diagnosis and immune repertoire analysis.
“Most people who start several businesses have a passion to solve a problem; they recognize the need in the marketplace and feel driven to do something about it,” Han says. “For me, it started as a way to finish the story my father started.”
And the Huntsville community and HudsonAlpha have been instrumental in Han’s continued work to build and grow biotechnology-based companies. “Huntsville has a lot of business activity and entrepreneurial spirit, and a nice angel network,” he says.
Han says it’s almost a tradition in Huntsville to invent a technology, get it recognized by a larger company, and then sell it, satisfying investors and freeing the entrepreneur to move on to the next big thing.
“It’s like raising a pig,” he says. “Once you grow a company to a certain size, you let it go.”
Nancy Mann Jackson is a freelance writer for Business Alabama. She lives in Huntsville.
Source: costar.com Written by Randyl Drummer
Vacancy Rates Likely to Increase in High-Construction Markets as Infusion of New Supply Hits Markets from San Francisco to New York City
|Apple plans to start moving 12,000 employees into its new 2.8-million-square-foot “Spaceship” campus this year.|
Steady growth in office-using employment over the last few years and rising demand from big employers for a diminishing supply of newer high-quality office space have combined to create a fertile environment for new office construction, and developers are ready to deliver.
This year will likely be the peak in the cycle for the delivery of new office projects, according to CoStar Portfolio Strategy forecasts. The U.S. office vacancy rate has continued to steadily decline, moving from 10.7% in 2015 to 10.4% in 2016. Vacancies are expected to hold fast at 10.3% in 2017 amid ongoing demand for existing space from tenants, according to analysts presenting CoStar’s State of the U.S. Office Market Q4 2016 Review and Forecast presentation.
“The big news in 2017 for the office market is that we’re expecting a 55% spike in construction deliveries, increasing from 58 million square feet of new office space in 2016 to over 90 million square feet this year,” said CoStar Portfolio Strategy Director of Research/Office Walter Page, who co-presented the review and forecast with Managing Director Hans Nordby and Managing Consultant Paul Leonard. “While some of those will be projects that were pushed back from last year, we’re just at that point in the market cycle where it’s time for new supply.”
The hefty totals projected for this year are the result of the large number of new office projects started in 2015. The 129 million square feet of new office space started in 2015 included such massive mixed-use developments as 30 and 55 Hudson Yards, and the $1.2 billion One Manhattan West office tower in New York City. An even larger total of 138 million square feet of new office space was under construction as of Jan. 1 of this year.
For the most part, major construction is concentrated in a handful of large metros. New York City has seen a jump of 107% while Southern California, where construction has started to pick up substantially for the first time since the recession, is up 27% in two years time. Texas office construction is down 35% since 2015, largely due to the construction shutdown in Houston, where energy sector tenants have put large blocks of space on the sublet market.
The 138 million square feet under way is still significantly lower than the 2000-2001 period, when over 200 million square feet was under construction. This has allowed national office vacancies to remain well below long-term averages, Page and Leonard said.
“We’re expecting that 2017 will be a peak year for this cycle, but we’re not going back to the levels we saw during the last cycle,” said Leonard.
That being said, most large markets are seeing construction levels as a percentage of total office inventory that are well above their historical averages. In the San Jose market, for example, construction totaling 9% of total office inventory, 10 million square feet, is under way, compared with 1.4% nationally. While pre-leasing is quite strong, potentially rising levels of backfill space that may become available when companies move into their new quarters is a concern, Leonard said.
New York City, which rarely registers among the construction growth leaders based on percentage of inventory due to the massive size of its base, currently has 19 million square under way, with the massive Hudson Yards comprising roughly half of that total.
“The Hudson Yards project alone is almost equivalent to the entire under-construction supply in the San Jose market,” Leonard said.
The impending wave of new supply will have an impending ripple effect on demand fundamentals such as net absorption, occupancy and rental rates in several large markets in coming quarters. Absorption totals for newer 4 and 5 Star office properties, which has fallen from 64 million square feet to 42 million square feet nationally over the past year, is expected to rise this year as several large build-to-suit projects, including large projects by Google and Apple, including Apple’s 2.8 million-square-foot “spaceship” headquarters campus, finally reach completion.
Office vacancy rates for newer buildings could shoot up to 25% in San Francisco, while vacancy rates for newer vintage buildings could potentially double in Denver and rise significantly in New York City and Los Angeles.
Meanwhile, high levels of construction in CBD submarkets are causing rental rates in the urban core to slow, narrowing the rent gap between downtown and suburban properties. In markets like Chicago, downtown construction comprises 75% of total construction within the entire metro, while urban core property makes up 40% of total stock within the Chicago metro. The same trend is occurring in New York City, Denver, Seattle, Washington, D.C. and Los Angeles, restricting rental rate upside in those CBDs.
“High levels of construction are beginning to put a limit on rent upside,” Page said.
However, strong demand growth markets that have had relatively little construction since 2006 such as Tampa, Orlando, Minneapolis and San Diego may present windows of opportunity for developers. But that window could close fast.
“The next developer to build a building in those markets is probably going to do pretty well, but for the third or fourth outfit, they’re probably too late,” Nordby said.